Merkel backs plans to retake EU powers

But she noted: "We don’t have to do everything in Brussels". 

She added: “We can also consider whether we can give something back. And we will also have this discussion after the Bundestag elections."

While Merkel's government is a strong supporter of the austerity policies created under the eurozone's new economic governance laws, she is anxious to reduce EU regional development spending and any measures which could restrict the bloc's single market.

Merkel's intervention, which come as she bids for a third term as Chancellor in elections in September, is likely to encourage other EU countries hoping to repatriate powers to the national level.

The UK government published the first batch of reports on EU powers in July as part of its "balance of competences" review. Prime Minister David Cameron's government has said that it will assess the role and extent of EU law-making before renegotiating the terms of the UK's EU membership ahead of a referendum planned for 2017.

Opting out of EU legislation affecting employment and social affairs, including the controversial working time directive, is likely to be at the top of any UK wish list, alongside special treatment of the City of London's financial institutions.

Dutch Prime Minister Mark Rutte, a key Merkel ally among EU leaders, has also expressed a desire to rein in the scope of EU law-making.

In a letter to the Dutch parliament in June, Rutte's government, composed of his own Liberal party and the centre-left Labour party, claimed that the era of pursuing "ever closer union" is over.

In particular, the Dutch government said that it would resist attempts to further harmonise national social security systems, working conditions and media regulation.

He has also floated the possibility of creating a legal mechanism for countries to leave the eurozone.

Speaking with EUobserver, Pawel Swidlicki, an analyst with the think-tank Open Europe, commented:

"That Chancellor Merkel has for the first time floated the possibility of returning some powers from Brussels back to member states proves that there is a window of opportunity for EU reform."