* FTSEurofirst 300 rises 1.8 pct, reaches seven-year high
* Athens index rises ahead of vote, led by banks
* European shares enjoy best week since 2011
* Cyclical stocks such as carmakers among top gainers (Updates with closing prices)
By Alistair Smout
LONDON, Jan 23 (Reuters) - European stock markets rose on Friday after the European Central Bank’s decision to buy government bonds, with Greek shares leading the gains before the country’s election on Sunday.
European shares posted their biggest weekly gain in more than three years as investors cheered the quantitative easing programme the ECB announced on Thursday.
The bond-buying plan helped Greece’s ATG share index rise 6.1 percent. Attica Bank, National Bank of Greece and Piraeus Bank gained 14 to 8 percent.
The anti-bailout party Syriza is leading in opinion polls before Greece’s election on Sunday. But traders are starting to see a greater chance that Syriza will reach a compromise with Greece’s official lenders if it gains power.
Alexis Tsipras, Syriza’s leader, said he was “certain” that Greece would be able to negotiate a “mutually acceptable solution” by July, when Greece will be eligible for the ECB bond-buying programme.
“The ECB have thrown a carrot to Syriza, saying that if you complete the review and agree with the troika (of international lenders), we will buy Greek bonds,” said Athanasios Vamvakidis, head of G10 forex strategy at Bank of America Merrill Lynch. “This increases the incentives for a Syriza-led government to compromise, and is market-positive.”
The FTSEurofirst 300 index of top European shares closed up 1.8 percent at 1,479.51 points, a seven-year high. The index rose 5.1 percent this week, posting its strongest week since December 2011.
Cyclical stocks such as carmakers, which are expected to benefit from a lower euro, featured among the biggest gainers. BMW rose 4.9 percent to hit a record high and PSA Peugeot Citroen gained 2 percent.
The prospect of quantitative easing by the ECB knocked the euro to a low of $1.1113 on Friday from $1.40 in May, potentially boosting European corporate earnings. Strategists say a 10 percent fall by the euro translates into a 6 to 8 percent rise in earnings for the region’s companies.
“It will be a major boost to exports and will lift confidence among company executives. Industrials will be among the top winners,” said Alexandre Baradez, chief market analyst at IG France.
Adidas rose 3.9 percent after reporting better-than-expected sales.
In the STOXX 600, six companies have reported fourth-quarter earnings, with 67 percent exceeding analyst estimates. In a typical quarter, 48 percent of STOXX 600 companies beat EPS estimates, according to Thomson Reuters I/B/E/S data.
Today’s European research round-up (Additional reporting by Blaise Robinson in Paris; Editing by Larry King)