Merkel seeks 'fiscal union' debt solution

BERLIN, Dec. 2 (UPI) -- A new or revised European Union treaty system is needed to instill budget discipline and install a crisis management plan, German Chancellor Angela Merkel said.

She told German lawmakers Friday a "fiscal union" was needed to resolve the dual crises of debt and confidence in the eurozone, the Financial Times reported.

France and Germany will outline their proposals for treaty change in the European Union Monday, she told the Bundestag, maintaining that only fundamental reforms to buttress budget discipline and restrain government borrowing would effectively deal with the causes of the fiscal crisis.

"We need budget discipline and effective crisis management mechanism," she said. "So we need to change the treaties or create new treaties."

In her speech, Merkel promised "concrete steps towards a fiscal union" of integrating individual countries' fiscal policies, with the European Court of Justice in Brussels authorized to levy penalties on rule-breakers, the BBC reported.

The German government has been pushing for changes to establish powers to veto national budgets in the eurozone that violate agreed-to rules, a process Merkel said would take years.

Merkel repeated her opposition to the European Central Bank issuing eurobonds backed by all eurozone members, the BBC reported.

"A joint liability for others' debts is not acceptable," she said. "Eurobonds are not a rescue measure in this crisis."

On Thursday, French President Nicolas Sarkozy said a new European treaty governing relations between members needed to protect Europe's position on the world stage.

Sarkozy said the euro could not continue unless eurozone economies unite, with France and Germany playing vital roles to ensure "a zone of stability," the BBC said.

The French president said the crisis could all-but eliminate Europe as a world player without immediate, far-reaching and fundamental changes.

"The world will not wait for Europe," he said in a nationally televised speech from the Mediterranean port of Toulon. "If Europe does not change quickly enough, global history will be written without Europe."

Sarkozy rejected Merkel's proposal that national budgets could be approved and regulated in Brussels, and that France would not cede its sovereignty.

Merkel brushed aside claims that Germany was looking to dominate its European partners, insisting her government was determined to resolve the eurozone crisis.

"Europe is in the middle of its greatest test," she said. "Too much is at stake, precisely for Germany and the Germans."

Germany had benefited from introduction of the common currency and its survival was "inseparable from the future of the European Union," she said.

She said intense negotiations were under way with all EU and eurozone member states and she was trying to persuade other ministers that treaty changes were a key part of resolving the crisis, the Financial Times said. Any intergovernmental treaty between the 17 eurozone members alone would be a "second best" solution.

The Merkel-Sarkozy meeting Monday comes ahead of a two-day European Union crisis summit that begins Thursday.