Merkel Pokes at Cameron With Backing for Two-Speed Europe

German Chancellor Angela Merkel said that she supports a two-speed European Union, with a core group in the euro pressing ahead with deeper integration and the U.K. among the others relegated to Europe’s margins.

Merkel’s comments, made as she prepared to host British Prime Minister David Cameron in Berlin today, underscore her differences with the U.K. leader, who is pressing for more aggressive action by euro countries to counter the financial crisis roiling the 17-nation currency zone.

“Those in a monetary union will have to move closer together,” Merkel said in an interview with ARD television broadcast today. “We have to be open. We always have to make it possible for everyone” to join. “But we must not stop because one or the other don’t want to come along just yet.”

With Spain struggling to avoid a bailout and Greece at risk of exiting the euro, Cameron and President Barack Obama called yesterday for an immediate plan to resolve the crisis. U.K. Chancellor of the Exchequer George Osborne stepped up the pressure today, saying Spain’s banks should have direct access to the euro area’s bailout funds, a proposal at odds with current rules and opposed by Merkel.

“The economic and political division between the Anglo- Saxon world and the ‘Germano-sphere’ is increasing,” Fredrik Erixon, head of the European Centre for International Political Economy in Brussels, said in a telephone interview.

U.K. Excluded

Europe is already moving at different speeds, Merkel said, citing the Schengen agreement that abolished border controls between some European countries and the monetary union that excludes the U.K. and Denmark.

“This will be intensified,” she said.

“We need more Europe, we need not only a monetary union, but we also need a so-called fiscal union, in other words more joint budget policy,” Merkel said. “And we need most of all a political union, that means we need to gradually give competencies to Europe and give Europe control.”

Ceding more control to Brussels is anathema to many lawmakers in Cameron’s Conservative Party, more than a quarter of whom defied the government in October and voted in favor of a referendum on continuing British membership of the EU.

‘Ebb Back’

Cameron said the following month that the euro crisis offered an opportunity for powers to “ebb back” from Europe to nation states. “We should look skeptically at grand plans and utopian visions,” Cameron said then. “We’ve a right to ask what the European Union should and shouldn’t do.”

Cameron, speaking in Norway before he left for Berlin, where he took part in a town hall-style event with Merkel and Norwegian Prime Minister Jens Stoltenberg, defended his intervention on policy affecting the euro zone of which the U.K. is not a member.

“All countries across Europe can help by offering the right advice and the right steps forward to the euro-zone countries,” Cameron said in Oslo in televised remarks. “Clearly the first priority is to stabilize the financial situation. That means recapitalization of banks, it means building of firewalls, it means reassuring markets.”

Merkel, in her television interview, said that EU leaders at a summit later this month will discuss a plan to transform the EU into a political union. Still, a breakthrough can’t be achieved at just one summit, she said.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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