* Peripheral European markets outperform
* ECB's Draghi reiterates readiness for new stimulus
* RBS falls on report of new fines
By Sudip Kar-Gupta
LONDON, Jan 2 (Reuters) - Southern European stock markets rallied on Friday, outperforming other markets in the region, as expectations grew that the European Central Bank would take more steps to boost the euro zone's economy.
In a German newspaper interview, ECB President Mario Draghi reiterated that the bank was ready for new measures, such as buying government bonds -- so-called quantitative easing -- to provide more stimulus.
Investors have speculated that QE would have the strongest effect on the euro zone's weakest economies -- Greece, Spain, Portugal and Italy -- and their stock markets posted the biggest gains on Friday.
Spain's IBEX rose 1.6 percent, Italy's FTSE MIB 1 percent and Greece's main ATG equity index 1.7 percent. By comparison, the pan-European FTSEurofirst 300 index was flat and Germany's DAX edged up 0.2 percent.
Greece's ATG index fell around 30 percent in 2014, hit by political uncertainty before a general election on Jan. 25. Polls showed the opposition Syriza party leading Prime Minister Antonis Samaras's New Democracy party, which imposed unpopular budget cuts under Greece's bailout deal. Syriza said it would cancel the austerity measures along with a chunk of Greek debt.
"It's unlikely that Syriza will end up being as radical as they appear in public," said Rupert Baker, a European equity sales executive at Mirabaud Securities. He said he was tentatively buying some Greek shares before the election.
Britain's blue-chip FTSE 100 index was flat, underperforming the gains on the continental European markets.
The FTSE was hurt by a pullback at Royal Bank of Scotland , whose shares fell after The Times newspaper reported it might face fines over the sale of toxic mortgage-backed debt in the U.S. of more than 5 billion pounds ($7.76 billion). RBS declined to comment.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up (Additional reporting by Lionel Laurent; Editing by Louise Ireland, Larry King)