European stocks rose, with the benchmark Stoxx Europe 600 Index extending its biggest weekly rally since November 2008, as Italy’s Prime Minister Mario Monti introduced a proposal to cut his nation’s debt.

Monti presented a plan to reduce the European Union’s second-biggest debt to the Chamber of Deputies in Rome today. The budget package came at the start of a critical week for Europe’s efforts to prevent Italy and Spain from succumbing to the crisis and causing a breakup of the single currency. France and Germany want a new EU treaty to set out the rules for euro-area governments, President Nicolas Sarkozy said after meeting Chancellor Angela Merkel.

Merkel and Sarkozy are developing a plan for stricter enforcement of the region’s deficit rules that they will present to EU leaders at a summit on Dec. 9.

National benchmark indexes climbed in every western- European market. France’s CAC 40 Index advanced 1.2 percent and the U.K.’s FTSE 100 Index rose 0.3 percent. Germany’s DAX Index increased 0.4 percent.

A gauge of European banks advanced 2.5 percent. UniCredit, Italy’s biggest lender, jumped 5.4 percent to 83.6 euro cents. Intesa Sanpaolo added 3.9 percent to 1.35 euros and BNP Paribas, France’s largest bank, rose 4.9 percent to 33.16 euros.

SAP slipped 2.5 percent to 43.61 euros. The German software maker agreed to buy San Mateo, California-based SuccessFactors on Dec. 3 to better meet demand for new technologies such as cloud computing, real-time analytics and mobile applications.

Commerzbank AG declined 4.1 percent to 1.44 euros as Germany’s second-largest bank offered to repurchase as much as 600 million euros of hybrid equity instruments.