Merkel urges gradual political union in Europe

German Chancellor Angela Merkel is calling for countries to give up more powers to Europe “step by step” as the continent tries to claw its way out of the debt crisis and says a “political union” is needed as leaders prepare for a closely watched summit later this month.

However, Merkel, who appeared on ARD public television's breakfast show today amid pressure on Germany to defuse the crisis, downplayed prospects of reaching a big solution to Europe's troubles at the June 28-29 summit in Brussels. The troubles of Spain's banking system and concern over Greece's future in the 17-country eurozone have generated uncertainty over the continent's economic outlook.

"I don't think that there is a single summit at which the big design will appear," Merkel said, suggesting the meeting would be an opportunity to press forward with already established plans.

European officials in Brussels and several fellow eurozone countries are pushing Germany to accept new measures, such as jointly issued eurobonds or a central banking authority, that would help defuse concerns about excessive debt in weak countries. But Berlin is against such steps in the near term, worrying that they would lower incentives for weak states to fix the finances and would cost German taxpayers more money.

Merkel repeated her motto for greater integration — "We need more Europe" — but did not offer details on how, or how quickly, she was willing to embrace new measures other countries are asking her to accept.

"We need not just a currency union; we also need a so-called fiscal union, more common budget policies. And we need above all a political union," she added. "That means that we must, step by step as things go forward, give up powers to Europe as well."

Merkel, who has faced criticism for focusing on austerity as a cure to Europe's financial woes, insisted anew that she is interested in growth, but that "budget consolidation and growth are two sides of one and the same coin."

"Without solid finances, there is no growth, but solid finances alone are not enough; there are other points — above all, questions of competitiveness," she said.

Merkel has championed a budget-discipline agreement, called the fiscal compact, in hopes of securing Europe's future financial solidity. Some countries already have ratified it, and Irish voters backed it in a referendum last week.

In Germany, her coalition government is negotiating with the center-left opposition to secure the necessary two-thirds majority in Parliament. The opposition is insisting on measures to foster growth and movement toward introducing a tax on financial transactions.

Negotiators made progress today towards an agreement on a transaction tax, opposition Green party lawmaker Priska Hinz said. That would call for Germany to pursue a tax in Europe on a wide range of transactions, even if not all 17 eurozone countries participate.

The two sides aim to reach an agreement next week, but they remain apart on other issues, Hinz said.

Merkel's junior coalition partners, the Free Democrats, have in the past been very wary of introducing a transaction tax, particularly if it doesn't cover the whole of Europe.

AP