(Corrects percentage move in paragraph 4 to 5.3, not 53)
LONDON, Nov 26 (Reuters) - Italian stocks jumped on Monday on accumulating signs of a climbdown from the Italian government whose budget deficit plans had set it on course for disciplinary action from the European Union.
The governing coalition is discussing reducing next year's budget deficit target to as low as 2 percent of gross domestic product from the draft budget target of 2.4 percent of GDP, a government source said on Monday.
The pan-European STOXX 600 climbed 1.1 percent, leading euro zone stocks jumped 1.3 percent, and Italy's FTSE MIB led the way by far with a 3-percent gain.
Italy's banks index jumped 5.3 percent, on track for its strongest day since June.
Unicredit and Intesa Sanpaolo were the top Italian gainers and among top European stocks, up 4.7 and 4.3 percent respectively. Lenders UBI Banca, Banco BPM , BPER Banca, and Mediobanca rose 3.7 to 4.1 percent.
Outside politics, dealmaking drove the biggest moves.
Faroe Petroleum shares surged 22.4 percent after Norway's DNO offered to buy it for 152 pence per share in cash - a 20.8 percent premium to its Friday closing price - valuing it at 607.9 million pounds ($779.81 million).
Melrose Industries meanwhile tumbled 4.8 percent after a Sky News report that the industrial company had got lower-than-expected bids for its Powder Metallurgy unit.
Eurofins Scientific rose 5.6 percent after the laboratory testing firm extended its organic growth objectives beyond 2020, and Berenberg raised the stock to "buy" from "hold".
Dutch marine engineer Boskalis jostled for pole position with Eurofins, with its shares climbing 6 percent after it said it had signed a multi-year deal with Saudi Aramco to work on its offshore facilities.
Boskalis would act in a consortium with Lamprell, whose shares also jumped 8.9 percent on the deal win.
Reporting by Helen Reid; Editing by Josephine Mason