Merkel outlines steps to 'stability union'

This would involve a possible EU treaty change to enforce budget control in euro states.

"If we say we want more Europe, then a treaty change cannot be a taboo,” said the chancellor noting that under the current Lisbon Treaty, there is "no mechanism" obliging countries to adhere to rules underpinning the euro.

The chancellor called it one of the EU’s "paradoxes" that countries can hauled before the European Court of Justice for breaching most EU laws but not when the euro rules are broken.

Merkel also dismissed the much-touted idea of eurobonds – the mutualisation of eurozone debt – saying it would lead to a "debt union".

"We have to tell people clearly that we cannot rid ourselves of today's problems - the excessive debts that have grown over decades - just like that, cue eurobonds and debt structuring, and then everything is ok again. No, this will be a long and difficult path, but one that is important for the future."

The chancellor said the central question that has to be dealt with is the fact that although all 17 eurozone countries are completely bound to one another, each has control over their national budget.

A solution to this thorny issue would lead to a more favourable climate for considering eurobonds, the chancellor indicated.

Solidarity alone is no good

She also dismissed "solidarity" as a stand-alone concept. "We need solidarity and personal responsibility," she said.

It is not those who immediately give in and help others who are right but rather those whose actions lead to a stability union.

"Brushing all problems under the carpet and talking about solidarity will not lead us to a stability union."

Her speech comes just weeks ahead of a Bundestag vote on extending the powers of the eurozone fund, so that it can buy bonds, something strongly criticised by some in her own party.

She reminded deputies that the discussions are not taking place in a vacuum and a rejection would have consequences.