EU to be federalised in the long run, Merkel says

"Indeed we must find a right way to stabilise eurozone permanently and eliminate its conception errors. We must be courageous and not shy away from treaty change if needed," she said.

To bring about a "true" economic union underpinning the common currency, there was need for more "binding" commitments from member states to make reforms. The EU institutions meanwhile should be given an even stronger role to "genuinely correct any inadequate procedures."

Wage-setting and taxes - the core powers of a nation state - had to be rather "coordinated" and "obviously carefully observing national democratic procedures."

Responding to calls by Liberal leader Guy Verhofstadt to urgently set up a federal European "state", Merkel pointed out that an attempt in that direction failed when French and Dutch voters rejected the European Constitution, in 2005.

"Of course the European Commission will one day become a government, the EU council a second chamber and the European Parliament will have more powers. But for now, we have to focus on the euro and give people a little bit of time to come along," she said.

She suggested that the idea of a special budget for eurozone members would help countries with high youth unemployment, such as Spain, to fund training. "Not all 27 countries in the EU will want to spend money on that, but it could be done at eurozone level," she said.

As for the dividing lines between euro-members and non-euro states, Merkel went back to the initial idea of the common currency: that it will be one day adopted by all EU countries.

Budget compromise

Heading to London on Tuesday evening for a dinner with British Prime Minister David Cameron, Merkel stressed the need for a deal on the EU 2014-2020 budget during a summit later this month. Cameron has threatened to veto any deal that would not fall in line with his Parliament's demands for a cut in the €1 trillion budget.

She was also clear on the importance of Britain staying the in the EU with increasing talk of it slowly detaching itself from the union.

"I want a strong UK within the EU. The UK was with us when we were liberated from National Socialism, I cannot imagine the UK not being part of Europe," Merkel said.

A German source told this website that Merkel is willing to "go all the way" to secure a deal at the summit starting on 22 November. "She has the stamina to do it," the source said, noting that the chancellor has cancelled all meetings for that weekend