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* UK first country to approve Pfizer-BioNtech COVID-19 vaccine

* FTSE up 1.2%; STOXX 600 flat

* Germany plans to extend coronavirus restrictions

* LSE set to win EU antitrust approval for $27 bln Refinitiv buy

Dec 2 (Reuters) - European shares erased session losses to close flat on Wednesday on an over 1% surge in London blue-chips after UK became the first country to approve Pfizer and BioNtech's COVID-19 vaccine.

London's FTSE 100 outperformed most regional peers, after Britain said the vaccine will be rolled out from next week, and as the pound slumped on Brexit trade deal uncertainty.

The pan-European STOXX 600 index ended steady with London's Rio Tinto, BHP Group HSBC among the biggest boosts.

BioNtech's Frankfurt-listed shares jumped 4%, compared with a 0.5% fall for Germany's benchmark DAX index , which lagged the most in the region.

Germany is planning to extend restrictions on restaurants and hotels until Jan. 10, sources familiar with discussions between the federal government and 16 states said on Wednesday.

"Lengthening (of curbs) would extend the damage done to economic activity. This means that a longer period of subdued activity will impact factors like unemployment, incomes and bankruptcies, ultimately causing the recovery to take longer," said Bert Colijn, senior economist, Eurozone at ING.

Data on Wednesday showed euro zone unemployment in October fell as the economy continued to recover before the second wave of the COVID-19 pandemic struck.

ING warns the unemployment rate points to a very mild labour market impact from the crisis so far, which brings upside risk to the GDP outlook for next year.

Spanish stocks closed up 1% near levels last seen in early March. Spain's economic recovery that started in the third quarter most likely continued this quarter, Economy Minister Nadia Calvino said.

Among individual stocks, the London Stock Exchange jumped 9.6% after sources said the company is set to win EU antitrust approval for its $27 billion acquisition of data analytics company Refinitiv.

Investors kept an eye on moves by Britain and the European Union as Brexit trade talks were still stuck.

Envoys of EU's member states on Wednesday urged the bloc's chief Brexit negotiator to not be rushed into an unsatisfactory agreement. (Reporting by Susan Mathew in Bengaluru; Editing by Shounak Dasgupta and Shailesh Kuber)