Greek stocks took a hammering after the country's new anti-austerity government pressed home demands for debt relief and rolled back the privatisation programme, but European markets largely shrugged it off as they focused on the US Federal Reserve.
London's FTSE 100 rising 0.21 percent to end the day at 6,825.94 points, while in Paris the CAC 40 shed 0.29 percent to 4,610.94 points.
However Frankfurt's DAX 30 index rose 0.78 percent to 10,710.97 points as German consumer confidence rose to a more than 14-year high.
"The upcoming January meeting of the Federal Reserve has given pause to European markets after the recent run up with fighting talk out of Athens adding some ‘eurozone break-up’ jitters into the mix," said CMC Markets UK analyst Jasper Lawler.
"A massive risk-off scenario across Europe because of the problems in Greece is definitely possible in the near future but for now it is being contained within Greece with Greek bank shares and Greek government bonds getting sold off heavily," he added.
Greek stocks tumbled by 9.2 percent, with the banks plunging by a quarter or more, and yields on Greek 10-year bonds also rose above the symbolic barrier of 10 percent.
Piraeus Bank lost nearly 29 percent, Alpha Bank was down around 26 percent and National Bank and Eurobank shed around 25 percent.
The lenders are currently eligible for special ECB support to help ensure that they don't run into liquidity problems from nervous Greeks pulling their money out of the banks, and could be highly exposed in a showdown between Athens and its creditors.
Greek voters over the weekend handed a decisive victory to radical left party Syriza, putting the country on a collision course with the EU and international creditors over its bailout and giving rise to fears that the country could exit the eurozone -- what is being dubbed a "Grexit".
Prime Minister Alexis Tsipras on Wednesday told his cabinet that Greece would seek a "fair, mutually beneficial solution" with its EU peers to renegotiate its 240 billion euro ($269 billion) EU-IMF bailout and make its huge debt socially manageable.
In a speech to the cabinet -- his first since taking office -- the 40-year-old premier however insisted that Greece's new leaders were no longer willing to bow to the "politics of submission", in a clear swipe at Brussels and the International Monetary Fund.
And in another move, the government halted the privatisation of Greece's main port, Piraeus, which Chinese shipping giant COSCO had planned to turn into its new European hub.
Greece's previous conservative government had planned to sell 67 percent of the port authority. The tender had a March deadline for the submission of offers.
Meanwhile the euro dropped to $1.1342 from $1.1380 late in New York on Tuesday.
- Apple rises -
US stocks were marking time ahead of the end of the Fed's meeting despite solid corporate earnings.
The Dow Jones Industrial Average rose 0.21 percent to 17,423.49 points, while the broad-based S&P 500 edged up 0.03 percent to 2,030.21 and the tech-rich Nasdaq Composite Index climbed 0.22 percent to 4,691.92.
Investors are eyeing the conclusion of a two-day Federal Reserve meeting and the release of a policy statement that will be scrutinised for signals on when the central bank could raise interest rates.
"If the Fed demonstrates concern over slowing global growth or inflation in its statement, that will be taken as dovish... (and) will probably be seen as positive by markets, at least initially," said CMC Markets UK analyst Jasper Lawler.
Strong earnings reports from technology giant Apple and aerospace powerhouse Boeing were providing support to the market
Apple bolted 7.0 percent higher after disclosing that first-quarter profits were a record $18 billion on booming sales of big-screen iPhone models, especially in China.
Dow member Boeing followed suit, rising 6.3 percent after reporting that fourth-quarter profits rose 18.9 percent to $1.5 billion on strong commercial aircraft deliveries.
The robust earnings reversed negative momentum from Tuesday, when a stream of disappointing profit reports sent markets sharply lower.
Asian stock markets ended mostly higher Wednesday, with Tokyo gaining 0.15 percent, Sydney adding 0.10 percent, and Seoul rising 0.47 percent.
Hong Kong shares climbed 0.22 percent but Shanghai fell 1.41 percent on liquidity fears after some banks tightened borrowing requirements for investors.