World stocks were mixed and the euro struggled higher versus the dollar despite growing strains on Spain on top of worries for Greece's eurozone future.
European equities rose in morning deals after Asian indices mostly closed lower as the leaders of the world's major economies embarked on the final day of the G20 summit determined to kickstart growth and the eurozone crisis.
Analysts were still betting on Greece exiting the European single currency despite weekend elections which saw Greece's two main pro-austerity parties win enough votes to form a government.
In a further blow to the eurozone, a survey revealed that German investor confidence plummeted in June, sustaining its steepest fall in nearly 14 years, on increased concerns over the health of Spain's banking system.
Spain on Tuesday succeeded in raising 3.04 billion euros ($3.8 billion) in a short-term debt sale but its borrowing costs soared as the eurozone debt storm battered Madrid.
"The eurozone crisis is entering a dangerous and existential phase with the rise in Spanish bond yields pointing to the need for a (Spanish) bailout while in Greece, the political situation looks fragile and not strong enough to diminish the scenario of a Greek exit," said Neil MacKinnon, an analyst at VTB Capital financial group.
In late morning trade, London's FTSE 100 index of leading companies climbed 0.83 percent to 5,536.64 points, after official data revealed a drop in British annual inflation.
Frankfurt's DAX 30 climbed 0.41 percent to 6,274.45 points and in Paris the CAC 40 eked out a gain of 0.08 percent to 3,067.56.
Madrid's IBEX 35 jumped 1.27 percent.
A financial source on Tuesday said that a detailed audit of Spain's stricken banks, which is to follow a first examination due by Thursday, had been delayed to September from late July.
It is the second of two audits ordered for the banks, many of them struggling with balance sheets heavily exposed to a property bubble that collapsed in 2008.
Spain's government won agreement on June 9 for its eurozone partners to extend a rescue loan of up to 100 billion euros to salvage the crisis-hit banks.
In foreign exchange deals meanwhile, the euro edged up to $1.2588 from $1.2571 late on Monday in New York. The single currency had surged above $1.27 at the start of the week.
"The initial relief rally in the euro... which greeted the more favourable Greek election outcome is already losing momentum," said Lee Hardman, currency analyst at The Bank of Tokyo-Mitsubishi UFJ in London.
"It is clear that the market is becoming increasingly dissatisfied by developments within the eurozone which merely buy time rather than attempting to solve the underlying problems."
Sunday's elections put Greece's conservative New Democracy party in the lead, with enough seats to form a ruling coalition committed to austerity measures set out in the nation's 130-billion-euro ($165 billion) EU-IMF bailout.
Monday's euro rally faded also as traders' attention moved to deepening troubles in Spain, where the yields on benchmark 10-year bonds rocketed to a euro-era record above 7.2 percent.
Anything over 7.0 percent is considered unsustainable and is the point above which Ireland, Portugal and Greece were forced into asking for a rescue package.
Madrid's woes come as it struggles to deal with a banking crisis as well as a miserable financial situation with soaring unemployment and a huge fiscal deficit.
Adding to the gloom, a report from Spain's central bank said bad debts in the country hit their highest level for 18 years in April, sparking concerns that the bailout for its banks might not be enough.
"Spain's funding issues have taken the limelight yet again. Not to see if they will need assistance but now by how much they will need in assistance," said Andrew Taylor, a market strategist at GFT trading group in Sydney.
"The figures of 100 billion euros seem to be well below audited estimates of 300 billion plus. That is a major mismatch in expectations come bailout agreement time," he said in a note to clients.
In Asia on Tuesday, Tokyo's stock market closed down 0.75 percent, Sydney shed 0.33 percent and Hong Kong ended flat.
Wall Street stocks finished mixed on Monday.