By Carla Mozee, MarketWatch

European stocks finished higher Friday following reports that a deal to unlock bailout funds for debt-burdened Greece may be possible over the weekend. But developments as trading wrapped up for the week suggested that bridging the gap between Greece and its creditors at a meeting Saturday will remain difficult.

The Stoxx Europe 600 ended up a modest 0.1% at 396.85, with financials the best-performing sector. But losses for energy, technology and industrial shares kept the market's overall gain in check.

Stock indexes turned higher following media reports that Greece's creditors planned to extend (http://www.marketwatch.com/story/greeces-lenders-plan-five-month-bailout-extension-reports-2015-06-26) the debt-laden country's bailout program by five months and release rescue funds of 15.5 billion euros ($17.38 billion). Greece's Athex Composite closed up 2% at 797.52 after being down by more than 1% at one point in the session.

Greek government bond prices climbed, pulling down the yield on 2-year debt by 1.6 percentage point to 19.91%, according to Tradeweb. The yield on 10-year bonds fell 26 basis points to 10.53%.

But late Friday, state-run Athens News Agency reported the Greek government rejected the bailout-extension proposal, calling it inadequate (http://www.amna.gr/english/articleview.php?id=10259). The euro fell 0.6% against the U.S. dollar late Friday.

Ahead of that news, German stocks had swung higher, leaving the DAX 30 up by 0.2% at 11,492.43, and France's CAC 40 ended up by 0.4% at 5,059.17.

Read: Greece standoff could drag on regardless of deal, document reveals (http://www.marketwatch.com/story/greece-standoff-could-drag-on-regardless-of-deal-document-reveals-2015-06-26)

Greece needs an economic-reform deal in place before it can tap a new round of bailout funds. Eurozone finance ministers were set to meet Saturday to work on a deal, with German Chancellor Angela Merkel saying that the weekend gathering should have "decisive significance." (http://www.marketwatch.com/story/greek-deal-talks-at-weekend-will-have-decisive-significance-says-merkel-2015-06-26) Greek pensions, sales taxes and military spending have been major areas of disagreement.

If Greece misses a EUR1.5 billion ($1.68 billion) debt repayment due Tuesday to the International Monetary Fund, the Hellenic nation will immediately be in arrears (http://www.marketwatch.com/story/imf-greece-would-immediately-be-in-arrears-if-it-misses-june-30-payment-2015-06-25) on its debt to the institution, the IMF warned Thursday.

Among other national markets, Spain's IBEX 35 moving up 0.5% to 11,372.30, and Italy's FTSE MIB gained 0.6% to 23,800.47. But the U.K.'s FTSE 100 fell 0.8% to 6,753.70.

The pan-European index for the week rose 2.9%, with much of the heavy lifting coming at the start of the week when a Greek government proposal on economic reforms was met with encouraging feedback from some European officials. But optimism in the markets began to fade after Greece's creditors rejected the proposal.

In company news, shares of K&S AG (SDF.XE) rallied 29.6% after Canada's Potash Corp. (POT) (POT) proposed a takeover (http://www.marketwatch.com/story/ks-says-potash-has-submitted-acquisition-proposal-2015-06-25-16485272) of its fertilizer-business rival.

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