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Merkel backs EU budgets veto power

German Chancellor Angela Merkel has backed a proposal for a top European Union official to be given the power to veto member governments' budgets.

Mrs Merkel also suggested that the EU could set up a new fund to finance projects in struggling countries.

She was addressing Germany's Parliament ahead of an EU summit starting later today where leaders will debate tightening financial integration, creating a banking union and how to deal with the financial needs of Greece and Spain.

In a bid to keep European countries from overspending again in the future, Germany's finance minister argues that the EU's monetary affairs commissioner should have the power to veto budgets if they violate deficit rules.

Mrs Merkel acknowledged many nations do not want to concede to Brussels the power to intervene in budgets. However, she said her government will "continue to push for it".

"I am astonished that, no sooner does someone make a progressive proposal ... the cry immediately comes that this won't work, Germany is isolated, we can't do it," she said. "This is not how we build a credible Europe."

Mrs Merkel again rejected the pooling of countries' debts, an idea favoured by struggling countries that hope to regain investor confidence to lower their borrowing costs.

But she suggested countries could make binding pledges to conduct reforms and be granted money for a limited period and for specific projects from a new fund, possibly paid for by a tax on financial transactions that Germany and 10 other countries have agreed to introduce.

Long-term proposals for overhauling the EU appear likely to play a leading role at this week's summit, with firm decisions not expected on more immediate matters.

Mrs Merkel again insisted that "quality must come before speed" as Europe works on setting up a continent-wide bank supervision system - something that many countries would like to have in place in January. Berlin says that is unrealistic.

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