German Chancellor Angela Merkel says the EU needs a political union even if it means some countries integrating faster than others, BBC News reported.
Speaking on German TV, she called for “more Europe”, including a budgetary union, saying “we need a political union first and foremost”.
“Step by step we must from now on give up more competences to Europe, and allow Europe more powers of control.”
However, she has resisted calls for the joint issuing of eurozone debt.
She will hold talks on Thursday with UK Prime Minister David Cameron, who has urged the 17-nation eurozone to speed up measures to build a budgetary union to shore up the embattled monetary union.
Ms Merkel’s insistence on economic austerity and budget discipline has alienated many Europeans who say the policy is strangling growth and piling more debts on the struggling “periphery” countries like Greece and Spain.
Spain has to find at least 80bn euros (£65bn) to shore up its banks, which are struggling because of bad property loans.
Spain’s finance minister has said the credit markets are “effectively shut” to his country, but so far Madrid has avoided asking the EU for a bailout.
On Wednesday the European Commission set out plans for a eurozone “bank union”, which could make it easier for troubled eurozone banks to access EU credit.
In her TV interview Ms Merkel reiterated that “budget consolidation and growth are two sides of 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.
Ms Merkel remains very cautious about the idea of pooling eurozone debts in “eurobonds”, despite growing calls – including from the European Commission – for the eurozone to launch them, BBC News said.