Greek shares lead European shares higher after ECB boost

* FTSEurofirst 300 rises 1.6 pct, hits 7-year high

* Athens' index rises ahead of vote, led by banks

* European shares enjoy best week since 2011

* Cyclical stocks such as carmakers among top gainers (Recasts, adds quote, detail)

By Alistair Smout

LONDON, Jan 23 (Reuters) - Greek shares led euro zone stock markets higher on Friday, boosted before Sunday's pivotal elections by the European Central Bank's decision to buy government bonds.

European shares were set for their biggest weekly gain in over three years, as investors cheered the ECB's quantitative easing programme to battle deflation.

The bond-buying scheme helped Greece's ATG share index rise 5.2 percent, with Attica Bank, National Bank of Greece and Piraeus Bank up between 11.6 percent and 8.8 percent.

Traders also saw a greater chance that anti-bailout party Syriza, currently leading in the polls, would reach a compromise with Greece's official lenders if they came into power.

Greece will be eligible for the ECB bond-buying programme but subject to stricter conditions because of its European Union/International Monetary Fund bailout programme.

"We are seeing a relief rally," said Beta Securities trader Takis Zamanis. "The market reflects it is more likely that a new Greek government will be formed on Monday."

At 1113 GMT, the FTSEurofirst 300 index of top European shares was up 1.6 percent at 1,476.29 points, posting a new seven-year high. The index is up 4.8 percent this week, set for its strongest week since December 2011.

Cyclical stocks such as carmakers, seen as the big winners from the euro's drop after the ECB's announcement, featured among the biggest gainers, with BMW (Swiss: BMW.SW - news) up 4.2 percent to hit a record high and PSA Peugeot Citroen up 2.6 percent.

"It will be a major boost to exports and will lift confidence among company executives. Industrials will be among the top winners," said Alexandre Baradez, chief market analyst at IG France.

The prospect of QE has knocked the euro lower in the past months. It hit a low of $1.218 on Friday, down from $1.40 in May.

A weak euro is seen boosting European corporate earnings this year. Strategists say a 10 percent fall by the euro translates into a 6 to 8 percent rise in earnings for the region's companies.

On the earnings front, Adidas (Other OTC: ADDDF - news) rose 3.8 percent after reporting better-than-expected sales.

In the STOXX 600, six companies have reported fourth quarter earnings, with 67 percent exceeding analyst estimates. In a typical quarter, 48 percent of STOXX 600 companies beat EPS estimates, according to Thomson Reuters I/B/E/S data.

Today's European research round-up (Additional reporting by Blaise Robinson in Paris and Angeliki Koutantou in Athens; Editing by Ruth Pitchford)