"German business confidence only gave in marginally, illustrating almost imperturbable optimism," Carsten Brzeski, the chief economist at ING, said in a research note. "The fundamentals are sound enough to see another acceleration of the German economy."
The euro edged higher on the news and stocks lifted off session lows.
Meanwhile, Germany's final figure for first quarter gross domestic product came in at 0.3 percent. This confirmed an earlier flash estimate.
French May business confidence data, also released on Friday morning, showed it had hit its highest level since August 2011.
Investors also focused on Sintra in Portugal, where approximately 150 central bank governors, academics and financial market representatives attended a forum on central banking.
Mario Draghi, president of the European Central Bank, spoke at the event during the morning session. He said that the economic outlook for the euro zone was "brighter today than it has done for seven long years."
Meanwhile, U.S. stocks traded mostly lower on Friday as investors awaited a speech from Fed Chair, Janet Yellen for new clues on when it could hike interest rates. Her speech is due at 6 p.m. London time.
Elsewhere, European leaders urged Greece to return to the negotiating table, as Athens and Greece's international bailout supervisors lock horns over a much-needed cash-for-reforms deal.
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