Friday's decline brought weekly losses for the for the pan-European stock market index to 4.6%.
European shares closed in the red on Friday but were well off the session lows, even as investors continued to be jittery about the fiscal situation in the debt-plagued euro-zone region.
The Stoxx Europe 600 index, which fell nearly 3% early in the session, finished down just 0.5% to 237.04. Friday's decline brought weekly losses for the for the pan-European stock market index to 4.6%.
The German DAX index fell 0.7% to 5,829.25, the French CAC-40 index dropped 0.1% to 3,430.74 and the UK FTSE 100 index declined 0.2% to 5,062.93.
Asian shares ended mixed, while US stocks closed with solid gains after oscillating between gains and losses in morning trading.
The German parliament approved the country's contribution to the joint EU-IMF support package for euro-zone countries struggling with high fiscal deficit levels. earlier in the week, Germany sent shockwaves across the globe when its regulator banned naked short-selling of certain financial instruments.
Drug stocks declined. GlaxoSmithKline shares lost 2.3% and Sanofi-Aventis shares fell 1.4%.
Royal Dutch Shell shares fell 1.1%. British oil giant BP, which is continuing to battle to clear up an oil spill in the Gulf of Mexico, was down 4.2%.
Rio Tinto shares gained 3.5% and Xstrata shares rose 6.4%.
British Airways saw it shares add 1%. It lost ground in the previous session when a court lifted an injunction that prevented cabin crew from striking.
British Airways said on Friday that its fiscal-year net loss widened to 425 million pounds ($613.2 million), from £358 million a year ago. The latest quarter's operating loss includes seven days of strike action with a net cost of £43 million.
BA said that market conditions are showing improvement from depressed levels in 2009/10 and it's targeting revenue growth of 6% and breakeven at the profit before tax level for fiscal 2011
Telecom stocks were in focus after the German spectrum auction ended late on Thursday. The auction raised €4.38 billion in total, according to reports. Analysts had been expecting proceeds of between €2 billion to €8 billion.
Vodafone shares rose 0.4% and Telefonica shares climbed 1%.
Dutch telecom firm KPN's shares rose 2.3%. It acquired 19% of the auctioned amount of frequency for €284 million and said that it will accelerate its share buyback program.
In the currency market, the euro rose versus the dollar, pushing the shared currency to its first weekly gain in five mostly due to short-covering. The euro touched a four-year low, under the $1.22 mark, earlier this week.
The euro rose to $1.2581, up from $1.2550 late on Thursday. gve4Earlier, it rose as high as $1.2672.
Against the Japanese yen, the euro traded at ¥113.05, from ¥112.99 on Thursday, a day during which the single currency dropped as low as ¥109.50 - its weakest since 2001.
The dollar index, which tracks the US currency against a basket of six major currencies, fell to 85.397, down from 85.637 late on Thursday.
The dollar traded at ¥89.87, compared to ¥90.01 late on Thursday, when it fell to a two-week low of ¥88.95.
The British pound bought $1.4472, from $1.4417 late on Thursday.
