Merkel calls for tighter euro fiscal union

German chancellor Angela Merkel says Europe should work towards a full fiscal union as it strives to resolve the eurozone's debt crisis.

This would entail closer supervision of national budgets, with countries facing penalties from Brussels if they falter.

But while European stocks have been rising ahead of a crucial EU summit next Friday, indicating optimism, many banks have already begun preparations for a eurozone break-up.

Rory Challands reports.