Merkel calls for greater European political union

The German Chancellor Angela Merkel has today called for a stronger European political union.

Chancellor Merkel said a political union is needed first and foremost, which means countries must, step by step, cede responsibilities to Europe.

Her comments came amid growing international calls for action to stablise Spain's banking system to avoid a costly bailout for the Eurozone's fourth biggest economy.

Chancellor Merkel said that in addition to the common currency, Europe needs a fiscal union and a political union, even if that came at the cost of a two-speed approach.

She has previously indicated that it would be wrong to establish eurobonds unless they are accompanied with closer fiscal union between eurozone states.

She said at the weekend: "You can't demand eurobonds but not be prepared for the next step in European integration. We won't be able to create a successful currency like that and no-one outside will lend us money any more."