Germany's budget controller idea fits with reform: Rehn

A German proposal for a "currency commissioner" with the power to reject national budgets is in line with euro zone reforms and will be part of talks to strengthen the currency bloc, the European Union's top economics official said.

German Chancellor Angela Merkel called just before the summit on Thursday for stronger central powers to intervene when member states break budget rules, voicing support for an idea mooted by German Finance Minister Wolfgang Schaeuble.

"These proposals are in line with recent and ongoing reforms of economic governance and certainly will be a key element of negotiations towards a stronger economic union," EU Economic and Monetary Affairs Commissioner Olli Rehn told a news conference before an EU leaders' summit on Thursday.

Merkel told the German parliament: "We are of the opinion - and I speak for the whole German government on this - that we could go a step further by giving Europe real rights of intervention in national budgets."

Rehn noted the euro zone already had much stronger tools to enforce budgetary discipline, thanks to the toughened Stability and Growth Pact, which now envisions swift fines for countries ignoring euro zone limits on deficits.

A new treaty, the "fiscal compact" currently being ratified, has provided more enforcement tools, including a requirement to set the goal of a balanced budget in national law, preferably the constitution.

But Rehn said even more was needed and pointed to legislation proposed by the executive European Commission in November last year, called the two-pack, because it contains two directives, which envisaged what Germany has called for.

"I would like to particularly underline the importance of a rapid adoption of the so-called two-pack, which will give the right to the Council (of euro zone finance ministers), at the proposal of the Commission, to return a draft national budget to the government concerned," Rehn said.

"It goes very much in the same direction as proposed by Chancellor Merkel and Finance Minister Schaeuble, with the required checks and balances in the form of the reversed qualified majority," Rehn said. (Reporting by Jan Strupczewski; Editing by Rex Merrifield and Ruth Pitchford)