With the UK market now closed it's time to bring the curtain down on this blog for another week.

And what a week. The FTSE 100 has finished the day 62.95 points higher at 5552.29, and since last Friday's close the leading index has climbed 7.47% - adding £100bn to the value of Britain's top companies. This is the best weekly performance since January 2009.

And it came thanks to growing hopes of a solution to the eurozone crisis, with EU politicians and officials seeming at last to be speaking with one voice, albeit a slightly unconvincing one. Reasonable US jobs figures helped matters too.

Even a late Friday rumour of a downgrade of Spain's credit rating, and noises from US Republicans that they may try to scupper any IMF plans to bail out Italy and Spain, failed to dampen the optimistic mood. So the French market ended up 1%, Germany 0.66% and Italy up 1.5%.

Thanks for all the comments, and we'll be back again on Monday for another episode of everyone's favourite eurozone drama, with the week ahead promising the latest meeting of the European Central Bank (to cut rates, or not to cut) and the key European summit on Friday.

Have a good weekend.

A quick round-up of today's main events.

• Angela Merkel has told the German parliament that the process of creating fiscal union has begun, ahead of next week's summit.

• Stock markets have risen, and bond yields have fallen. There is optimism that Europe's leaders are making progress and the US jobs numbers also cheered markets.

• David Cameron and Nicolas Sarkozy met in Paris. Cameron said afterwards he would defend Britain's interests if EU treaty changes were made. Last night, Sarkozy called for amendments - but analysts question whether France is really prepared to surrender budgetary control.

Time for a look at the markets. On Wall Street, the Dow Jones is up 115 points at 12133, a 0.9% gain. The FTSE 100 index in London has climbed 71 points to 5561, a 1.3% increase while Germany's Dax is 1.3% higher and France's CAC is up 1%.

Bloomberg is reporting that a mooted plan for the ECB to lend to the IMF is being revived.

A European proposal to channel central bank loans through the IMF may deliver as much as €200bn to fight the debt crisis, two people familiar with the negotiations said. At a Nov. 29 meeting attended by European Central Bank President Mario Draghi, euro area finance ministers gave the go-ahead for work on the plan, said the people, who declined to be named because the talks are at an early stage. The need for a new crisis-containment tool emerged as the effort to boost the €440bn rescue fund to €1 trillion fell short. Under the proposal, national central banks would recycle funds through the IMF, potentially to underwrite precautionary lending programs for Italy or Spain, the two countries judged to be the most vulnerable now, the people said.

But Raoul Ruparel at think tank Open Europe was not overly impressed:

The ECB lending to the IMF may circumvent the legal issues of direct ECB financing to states, but it is definitely de facto against the principles of the ECB and is unlikely to gain widespread support in Germany. In any case, it can only provide a short boost in liquidity but doesn't solve the underlying competitiveness and structural problems in these countries. For the most part, it's the same old problems in a slightly different package.

David Cameron has waded into the debate over EU treaty changes. He said he was not convinced they were necessary to sort out the eurozone crisis, but added he whould make sure Britain would get a good deal if changes were made.

The prime minister said after meeting Sarkozy:

I'm very clear if there is treaty change then I will make sure that we further protect and enhance Britain's interests. The bottom line for me is alwayas what is in the interests of the UK and how can I promote and defend that.

Michael Derks, chief strategist at FxPro, says do not be fooled by the US jobs numbers.

For the optimists, the sharp decline in the unemployment rate last month to 8.65% from 9.01% is a sign that the US labour market is finally emerging from its slumber. Together with another impressive jump in household employment (up a further 278K last month, an average increase of 321K over the past four months), it appears that things are getting rosier. Even the underemployment rate is falling, down to 15.6% in November from 17.0% a year ago. However, do not be fooled. It is worth noting that much of this superficial improvement reflects the fact that more and more Americans are simply choosing to drop out of the labour force. In November, another 487K dropped out of the workforce; now 86.6m people are officially 'not in the labour force', compared with total employment of 140.6m. Four years ago, 79.2m were categorised as 'not in the labour force'; six million people have now lost their jobs over this period. All this time, the average duration of unemployment keeps on rising, now 40.9 weeks, up from 17 weeks in November 2007. Some may like to think things are getting better in the US labour market, but a more accurate interpretation is that it is still terrible - and getting worse - for the army of unemployed and discouraged workers.

Ken Goldstein, economist at the Conference Board, says the nonfarm figures are good news but there's still a long way to go.

Back in August people were asking if we had fallen off a cliff, well we hadn't. But we are not near levels that economists would call robust growth. There's a chance we could be there by this time next year.

Another response to the US numbers, from Marcus Bullus, trading director at the stockbrokers MB Capital.

Expectations had weighed heavily on this set of figures - and in the event they did not disappoint. But they hardly sparkled either. After a week of largely positive economic news, there are increasing hints that America's jobs market may slowly be awakening from its slumber. The net number of jobs created was in line with expectations, and just about kept pace with the population replacement level. But the headlines will all be about the fall in the overall unemployment rate to 8.6%. They'll surely come as a blessed relief for the president as he tries to drive the American Jobs Act through a largely sceptical Congress. The markets too will be reassured, to a degree, by the suggestion that the US jobs market is stabilising. 50,000 jobs were created by the retail sector in November - long seen as the engine of the US economy. While there may be an element of seasonality to these hires, such upbeat numbers will clearly cheer the more bullish observers. The continued uncertainty over Europe still looms large, but the markets are taking any glimmers of hope well at present - and these figures will improve the chances of US stocks ending the year on a high.

Some reaction to the US data. Rob Carnell at ING noted that there were strong job gains in the retail sector, which added 50,000 jobs in November. Temporary help supplied rose 22,000, although he described manufacturing jobs growth of only 2,000 as "pretty disappointing".

In contrast to the slightly soft headline figure, the unemployment rate fell far more than expected, dropping 0.4pp to 8.6%. This fall resulted from a combination of a decent 278K gain in employment according to the household employment survey, and also a fall in the civilian participation rate of 315K. The U6 broad unemployment rate fell even more from 16.2% to 15.6%. These household survey figures have been running consistently stronger than the payrolls numbers, and suggest that there may be even more substantial upward revisions to payrolls in the New Year when annual benchmark revisions are made. But despite the strength of the household figures, the wages numbers were weak. Hourly earnings fell 0.1%mom, taking the YoY rate down 0.1pp to 1.8%. And average weekly earnings also fell 0.1% on the month. Moreover, the average and median duration of unemployment rose again, suggesting that structural unemployment remains a problem.



He concluded:

A mixed report, and not one that will lead to a sea-change in the Fed's current "wait and see" approach to monetary policy, with the "twist" likely to continue unchanged for the time being.

Revisions to the US employment numbers for September and October mean that 72,000 more jobs were created than previously thought. October now shows a 100,000 increase in jobs and September a 210,000 rise.

The private sector added 140,000 more jobs last month, while the government shed 20,000 positions. There were an extra 2,000 factory jobs - fewer than expected - following October's upwardly revised 6,000 increase.

Good news on the US employment front. The closely-watched non-farm payrolls figures are bang in line with expectations: American employers hired 120,000 more workers last month. More importantly, the jobless rate dropped to a 2 1/2 year low of 8.6%, adding to evidence that the economic recovery is picking up speed. Unemployment had been stubbornly stuck at around 9% since April.

For Brazil, things are tickety boo. Brazilian finance minister Guido Mantega early this morning:

"It's a big satisfaction for us that this time around the IMF comes to Brazil not to give us money like in the past but asking us to lend money to developed nations … the BRICS agreed to add resources to the IMF but that is

conditioned to a continuation of the IMF quotas reforms … And on the collaboration from other countries like the United States and European countries themselves to contribute more resources to the fund."

What's the Brazilian Portuguese for 'Schadenfreude'?

Time for a lunchtime round-up

• Angela Merkel has told German MPs that the process of creating fiscal union has begun, and is the solution to the crisis. The chancellor told the Bundestag that "very serious and concrete" steps are being taken, but warned that delivering fiscal union would be a "marathon" effort.

• Stock markets have risen, and bond yields have fallen. There is optimism that Europe's leaders are making progress.

• David Cameron and Nicolas Sarkozy are meeting in Paris now. Last night, Sarkozy also called for new EU Treaty changes - but analysts question whether France is really prepared to surrender budgetary control.

• Experts warn that Europe is in the last-chance saloon. "Eurozone could collapse by Christmas" warns Sharon Bowles MEP.

So are European leaders really close to a deal? Gavin Hewitt, the BBC's Europe editor, reckons Merkel's speech shows that a "Grand Bargain" could finally be close.

Hewitt argues that France and Germany have not agreed that the flaws in the single currency are systemic, and needs to move to a fiscal union, with much greater central control over tax and spending. Thus:

The eurozone countries bring their deficits under control and embrace budgetary rigour. The ECB follows this up by intervening in the markets and lowering borrowing costs. Confidence gradually returns.

But...

President Sarkozy recognises this would just be a start. There needs to be a coming together, a convergence of these very different economies. At the moment they are growing apart. Recession threatens. The debt mountains are increasing as austerity bites.

Our colleague Helen Pidd has written about Merkel's speech here -- including the fact the chancellor told MPs it was "absurd" to claim Germany was trying to "dominate" Europe.

Perhaps the ECB shouldn't go overboard with the anniversary celebrations -- Sharon Bowles MEP reckons there's a danger that the eurozone will collapse by Christmas:

Bowles told a conference of mortgage industry leaders yesterday that "We are potentially facing the demise of the Euro by Christmas", an event that would "wreck our economy". She added that:



Contrary to what the Eurosceptics say, the issue now is not whether the UK remains in the EU but how we contain the Eurozone crisis.



If the Euro breaks up, I think there will be rampant protectionism. Even if you get a smaller Euro with just the AAA countries huddling together they will still go down the track of protectionism.



If the Euro breaks up then countries, including the UK, should work to save the EU, so that we continue to benefit from the Single Market and avoid a situation of every man for himself.



We need something concrete and substantial next week from leaders. Promises and packing up for Christmas holidays will not do.

Here's a date for the diary - on January 1 2012 the eurozone will be celebrating the 10th anniversary of the introduction of the single currency.

To mark the euro's tenth birthday, the European Central Bank took some time off from mopping up Italian and Spanish debt to create this remarkable video - a cross between a Rosetta Stone advert and the educational films we dozed through watched at school.

Our favourite part of the clip is a reminder that Greeks and Italians only have until the end of February 2012 to redeem their old drachmas and lira for euros. In the current climate, you can see why people might be hanging onto them....

The ECB has also created an online game for "euro generation" children, aged 9 to 12. Great idea, but was "Euro Run 2012" really the best title?...

Excellent debate in the readers comments below the line about Merkel's speech.

Here's a round-up of some of the best (with thanks to my colleague Hannah Waldram)

stuv said that a fiscal union would have serious consequences for the UK:

If there is a new and better treaty for the EU underpinned by fiscal union, then the UK would at last have to put up or shut up. Be part of a developing vibrant Europe. Or dwindle into some sort of Cayman Islands tax and financial services economy, client to and dependent on the likes of China. Clearly Cameron and his rich chums would prefer the latter. But will the LibDems re-find their spine and withdraw from the coalition to fight for their EU policies?

Kingsgate warned that Europe's citizens face a very difficult future:

Now the stakes are raised with the idea of a fiscal union. The tragically ironic result will be the increase of tensions within the Eurozone, as opposed to harmonic good relations which is the default between mature states that compete and have economic freedom. European politicians naturally want the European institutions to survive as it is in their interests; but I fear that the Euro - and now, to a lesser extent, the whole EU institutions - are actively worsening conditions for their citizens.

RoaroftheSevernBore argued that Merkel was acting sensibly:



A fiscal union and more European integration is the only way to build up a counterweight to the financial markets in the long term but there needs to democratic reform as well. I think that Merkel´s intentions are quite sensible taking matters step by step (sorry, but this is not dithering. She can´t just sign a blank cheque which is what people are asking of her). What worries me are the the ex Goldman Sachs people at the head of Greece, Italy and in the ECB.

In the financial markets, traders have responded to Merkel's speech by pushing up the value of Italy's and Spain's debt -- in a sign that they are more confident about the crisis.

The yield (interest rates) on Italian 10-year bonds fell to 6.5%, from 6.8% this morning. Spanish yields are down at 5.5%, from 5.8%. Falling yields mean that the cost of borrowing for these countries has come down - a yield above 7% is generally seen as unsustainable.

Sarkozy's call for a new EU treaty last night has also left investors hoping that we really are on the edge of a breakthough.

As Chris Beauchamp, market analyst at IG Index, explained:

We might have been here many times before, but hopes of more progress on the eurozone crisis are buoying markets this morning. Comments from ECB head Mario Draghi, who hinted last night at a greater role for the ECB in the crisis if governments work on restoring confidence in their finances, have boosted risk appetite, while both Mr Sarkozy and Ms Merkel have done their bit, saying that progress was being made towards a more comprehensive fiscal union.

Merkel's comments that the eurozone is on the "verge of" fiscal union to the German parliament this morning chime with what ECB president Mario Draghi and French president Nicolas Sarkozy said yesterday about the "fiscal compact".

It is clearly an orchestrated attempt to present a common front on this controversial issue, ahead of the summit meeting next week.

What does fiscal union mean exactly, though?

There are different interpretations. Merkel wants the European commission to have a veto over countries' tax and budget plans, whereas the French want national parliaments to be involved, as the budget minister Valérie Pécresse spelled out yesterday.

Pécresse declared after a cabinet meeting that France wanted "more budgetary discipline, but a budgetary discipline exercised by the states, with a real participation by national parliaments" .

So plenty of hurdles to overcome. Including in Germany - as Merkel pointed out in her speech, "the German constitution does not permit devolving budget control to a European institution".

She said her vision was that the European commission and the European courts must have a bigger role "without the German parliament losing budget control". The big question, though, is how is fiscal union credible if parliaments can veto the demands of the central authorities?

One possibility is that member states would pledge to stick to tough fiscal targets, with national parliaments decided how it was achieved. But then, what happens to transgressors…?

More reaction to the speech, this time from Michael Derks, chief strategist at FxPro:



On the surface, last night's speech by French president Sarkozy appeared to suggest that he was endorsing Angela Merkel's vision of how fiscal union in Europe will look. Sarkozy stated that eurozone countries must prepare their national budgets in a common fashion, face stringent automatic penalties for breaking fiscal rules and undertake measures to narrow competitive gaps. He also supported EU treaty change and the proposal for Europe to shift to qualified majority voting in order to facilitate more rapid decision-making. More critical, however, was what Sarkozy did not say on fiscal union. As made clear by his budget minister yesterday, France is deeply troubled by the idea that the European Commission will have the power both to review national budgets and have veto power over them. Always the master of nuance, France supposedly supports tougher automatic sanctions for fiscal rule-breakers, but at the same time wants national discretion over implementation. On some level, this last debate is rendered superfluous because most eurozone members will not get anywhere near satisfying the fiscal rules for some considerable time and so the imposition of financial penalties in the interim would make their plight even more tenuous. Merkel is apparently in Paris on Monday to thrash this issue out with Sarkozy, just four days ahead of the next EU Summit but Merkel is extremely unlikely to relent. For Sarkozy, there are huge political hurdles to accepting Merkel's vision. The outcome of Monday's meeting will tell us a great deal about the single currency's near-term future.

Reaction to Angela Merkel's speech is coming in.

Ilya Spivak, global macro G10 FX strategist at DailyFX.com, said that if eurozone leaders agree on "a roadmap for closer fiscal integration" at next week's summit, that would then "open the door" for the European Central Bank to expand its firepower.

Nigel Farage, head of UKIP, argued that Germany was putting more pressure on peripheral eurozone members:

Nigel_Farage: And Angela Merkel once again turns the screws on the Club Med countries in the Eurozone...

Also on Twitter, Daniel Furr points out that the process of fiscal union will be lengthy:

DanielFurrUK: Fiscal Union will take years. Took the United States nearly 15 years

Daniel compared the European debt crisis to the US civil war in this piece last summer - still well worth a read.

Another quote from Merkel's speech on the push for closer fiscal union:

In Europe we are now wrestling over the fine print, not about the plan as a whole. We're not arguing that politicians have to find a way to solve the debt crisis in the long term...[but to] finally find ways to adhere to and realise those measures already agreed.

She said that European leaders had shown themselves ready to "change the basis of [European] cooperation – though, for example treaty change – in order to create a fiscal union with strong interventionary powers, at least for those countries in the eurozone."

Angela Merkel has been pushing for closer fiscal controls across the eurozone for some time. But, as she admitted herself, such ideas seemed remarkable before the crisis escalated.

She told MPs (translation by correspondent Helen Pidd):



Anyone who, a few months ago, had said that at the end of the year 2011 we would have taken very serious and concrete steps towards a European stability union, a European fiscal union, for introducing such drastic intervention, would have been considered crazy. Now, this is exactly what's on the agenda. We're almost there. Of course, there are difficulties to be overcome. But the necessity of such action is widely recognised. We're not just talking about a fiscal union but starting to create one. I believe you can't overestimate the importance of this step.

Here's the key point from Merkel's speech to the Bundestag in the last few minutes -- her goal at next week's Brussels summit is to push towards fiscal union to hold the eurozone together.

The German chancellor told MPs that:

We are not only talking about a fiscal union, we are beginning to create it.

Such a union will need budget discipline and effective crisis management mechanism, she said. It will also clearly require EU Treaty change, or possibly even new treaties. So this is not a short-term fix.

Merkel also told MPs that she was keen to "avoid a split between euro countries and non-euro countries".

Merkel went on to tell the Bundestag that the single currency would survive:

Europe is facing its biggest test ever. The euro has proven its value. It is stable. But it is a lot more than a currency. It represents Europe's will to unite within and to face global challenges.

The German chancellor tells MPs in the lower house that European politicians have "lost credibility" during this crisis (a sentiment many of you will probably agree with).

Merkel also takes another swipe at her favourite bugbear - eurobonds (or stability bonds, as the EC attempted to rebrand them):

Whoever hasn't understood that eurobonds can't be used as emergency measures in this crisis, hasn't understand the essence of this crisis.

She adds the German constitution does not permit devolving budget control to a European institution and that any discussion about euro bonds is therefore pointless.

Merkel went on to stress that we must defend the credibility of European courts and central banks, and that it is important to respect the independence of the European Central Bank.

Angela Merkel has begun giving her speech to the Bundestag. She starts by telling MPs that:

We are dealing with a sovereign debt crisis, but also with a crisis of trust.



She stressed that it was important to respect the independence of the European Central Bank.

The ECB's role is different from that of the Federal Reserve and Bank of England. Its role is stabilise the value of the currency.

There's also no chance of a quick-fix, she explains -- adding that resolving the euro crisis will take "years".

The financial markets are open in Europe, and shares are ralling strongly. The FTSE 100 has jumped 65 points to 5554, a gain of 1.2%, with similar gains in other markets.

The early word in the City is that confidence is growing that the crisis can be resolved in an orderly fashion. Sarkozy and Merkel's meeting next Monday is seen as an encouraging development that Europe's two biggest countries could drop their differences.

That could lead to a plan for tougher fiscal controls across the eurozone.

Mario Draghi's comments yesterday, when he said a "fiscal compact" was needed, are crucial. The head of the European Central Bank appeared to be hinting that he'd take more aggressive action once European leaders agree stronger budget controls.

Today's meeting in Paris comes just hours after Sarkozy called for a new EU Treaty, and insisted that no eurozone member will default.

If you missed last night's speech in Toulon, the French president revealed that he will meet with Angela Merkel to hammer out the framework of a rescue plan - ready for the EU summit taking place later next week. That could herald an official two-speed Europe - but could also suggest there is more chance that an agreement will be reached in time.

Sarkozy also told the French people to prepare for tougher times.



A true revolution has begun. For traders' pay, for tax havens, nothing will ever be as it was before. The crisis is not over. To deny the crisis is to avoid any forward thinking. The huge pyramid of debt, previously hidden, is seen by all as a huge risk.

Good morning, and welcome to another day of rolling coverage of the eurozone crisis.

Top of today's agenda: David Cameron is heading to Paris to meet Nicolas Sarkozy. The last time they met, Sarko told the PM to "shut up" and stop interfering with the eurozone crisis – so today's meeting could be lively.

The political pressure is rising – Angela Merkel will give a speech to Germany's Bundestag today, explaining what she will push for at next week's EU summit.

Elsewhere, the latest monthly jobless data from America should show how the world's biggest economy is faring.