European stock markets closed higher Friday, supported by news of a eurozone deal to boost the bloc's firewall against future financial crises and solid US data.

Dealers said the positive headlines on the eurozone deal helped sentiment, although details of the actual amount of new money available leave much to be desired, especially at a time of growing concerns over Spain.

The Spanish government meanwhile announced a tough austerity budget to produce savings of 27 billion euros in an effort to ease the strain on its public finances amid speculation Madrid could be the next to need a bailout.

Dealers said there was on balance enough good news to allow the markets to bounce back after losses earlier in the week but sentiment remains cautious as the first quarter draws to a close and investors closed out positions.

In London, the benchmark FTSE 100 index of top companies closed up 0.46 percent at 5,768.45 points. In Frankfurt, the DAX 30 rose 1.04 percent to 6,946.83 points and in Paris the CAC 40 gained 1.26 percent to 3,423.81 points.

Madrid advanced 1.23 percent as news of the budget came through and Milan added 0.45 percent after sharp losses on Thursday.

In New York, the blue-chip Dow Jones Industrial Average was up 0.37 percent but the tech-heavy Nasdaq Composite was little changed with a gain of 0.08 percent.

Dealers there said the eurozone debt accord and a sharp spike in US consumer spending in February, albeit driven by higher petrol (gasoline) prices, provided support as another sign the US economy is recovering.

Spending outpaced income growth but analysts said they did not see a problem with this.

"Although real disposable income growth has been soft over the last three months, we expect this to pick up given the recent trends in employment growth," said RDQ Economics.

The European single currency rose to $1.3329 from $1.3301 in New York late Thursday.

Eurozone finance ministers meeting in Copenhagen agreed to boost their debt crisis firewall to about 800 billion euros ($1.07 trillion), comprising 500 billion euros from the permanent ESM bailout fund that comes into effect in July, plus 200 billion euros in loans already pledged, plus another 100 billion euros in bilateral loans and EU funds.

"Equities are holding up well despite the number coming in short of the 940-billion-euro package that many had hoped for," said analyst David Morrison at trading group GFT.

"This is probably because there was a danger that Germany would lead the push from stronger EU members for a smaller bailout fund."

Other analysts cast serious doubt on whether the firewall would be big enough to stop the eurozone sovereign debt crisis once and for all.

"This so-called firewall is about as much use as a chocolate fireguard," said Michael Hewson at CMC Markets.

"Germany has already said that any new firewall should not exceed 800 billion euros. This is by no means enough if you want to send a message that you are serious about protecting Spain and Italy.

"The bottom line, is unless EU leaders mobilise a firewall in excess of 1.0 trillion euros, doubts will remain about their ability to prevent a contagion."

Highlighting the main reason to bolster the firewall -- fears that the sovereign debt crisis that started in Greece could spread to larger economies such as Italy and Spain -- were fresh concerns about Spanish fiscal strains.

Spain's borrowing costs have risen in recent weeks after Madrid admitted it had missed its 2011 deficit target of 6.0 percent of gross domestic product, reporting 8.5 percent instead.

"The problem is that troubled countries such as Ireland, Portugal, Spain and possibly Italy, just cannot grow fast enough to address their outstanding national debt, which continues to mount up," said analyst Morrison.

"In particular, the situation in Spain is looking increasingly precarious."

In Asia, Tokyo lost 0.31 percent, Hong Kong was down 0.26 percent but Shanghai gained 0.47 percent.