Political union beginning to take shape, Merkel says

Referring to a sense of determination in other EU leaders to overcome the eurozone problems, the chancellor said: “I am sure that this common sense of responsibility will remain with us far beyond the crisis.”

“This means nothing else than that a real political union is beginning to take shape.”

She said this would mean that all countries will eventually have to work more closely on laws together “even if that is not yet legally required and enforced.”

This will require a “change in thinking” in national parliaments and the willingness to put themselves in the place of others. “We should learn from the best in all areas,” said the chancellor.

Her speech in the Bundestag comes as the summit agreement by EU leaders has already been criticised for causing legal confusion while not convincing markets that the eurozone crisis is on the way to being properly solved.

At the meeting, up to 26 member states agreed to make an intergovernmental treaty on centralising budgetary surveillance, with only Britain remaining outside after it failed in its bid to get special exemptions for its financial services sector.

Promising MEPs that they would have "observer status" in the negotiations, Merkel said the treaty should be ready by March and then should pass through parliamentary ratification "as fast as possible."

Drawing a line under the division with London, Merkel said that while she regretted the outcome, the UK is and will in future remain an "important partner."

However she was fiercely criticised by the Socialist opposition leader, Frank-Walter Steinmeier.

'Not harmless'

Mocking the chancellor for her pursuit of EU treaty change ahead of the summit, Steinmeier, he said the intergovernmental path chosen sounded “harmless at first glance, but it is not.”

“With this (solution) we are putting Europe on a politically and legally fully incalculable path.”

He pointed out that the Czech Republic, Hungary, Denmark and Finland could have problems with the agreement while noting that the European Commission will be making sure that the Lisbon Treaty, over which the commission is the guardian, will take precedence over the new pact as much as possible.

The centre-left politician also said he believed that the "alienation process" with Britain will prove unstoppable and that Germany will come to regret the situation in a "few months' time."

The opposition criticism comes amid in-fighting within Merkel's own coalition partner, the business-friendly Free Democrats, over the extent to which troubled eurozone countries should be helped.

On Wednesday, General Secretary Christian Lindner resigned as a result of the party's deep divisions on the issue.