Germany's Schaeuble urges big leap forward in euro integration

German Finance Minister Wolfgang Schaeuble has called for a great leap forward in European integration ahead of a summit of EU leaders, urging the creation of a new commissioner with power over budgets and reform of European Parliament decision-making.

Schaeuble, a longtime advocate of closer EU integration who is not shy about voicing his personal views, said he had spoken with Chancellor Angela Merkel about his proposals and that she was "somewhat more cautious".

"We must now make bigger steps in the direction of a fiscal union," Schaeuble told reporters on his way back from a trip to Asia. "We must use this chance."

He said a new "currency commissioner" should have the power to reject national budgets that were not in line with the euro zone's strict fiscal criteria, without specifying whether such a figure should have the power to impose penalties.

The model for the position would be the bloc's competition commissioner, who Schaeuble said was "feared in the whole world".

He also called for more flexible voting arrangements in the European Parliament to accommodate closer integration between euro zone states.

European officials are looking for ways to boost the democratic legitimacy of their drive towards a closer union, but have run up against the dilemma that the European Parliament includes countries from outside the euro zone.

"In the European Parliament lawmakers only from countries directly affected by a given issue should vote on it," Schaeuble said.

Such a reform would accelerate the trend towards a two-speed Europe, with the euro zone as an inner core.

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Some of Schaeuble's ideas are likely to stir unease even within the euro zone, where countries such as France are reluctant to surrender more sovereignty to EU institutions.

Weaker economies such as Greece, reeling from German-backed austerity programs, will also be wary of entrenching the power of outsiders to run their financial affairs.

A previous proposal from Schaeuble for a "Sparkommissar", or savings commissioner, was quietly dropped after it stirred fury in recession-mired Greece and got a cool reception from Germany's other European partners.

Undaunted, Schaeuble said it was important to build momentum for greater fiscal and political integration, saying the bloc could launch a convention by December if it made good progress.

Merkel has previously said she would like the EU's December summit to agree a concrete date for the start of a convention.

The idea recalls the 100-plus strong gathering of EU lawmakers set up in 2001 - inspired by the Philadelphia Convention that led to the adoption of the U.S. federal constitution - charged with preparing a European charter.

The document that emerged was rejected by French and Dutch voters in 2005 and a watered down version ended up forming the basis of the EU's Lisbon Treaty, which is in force today.

Many member states, recalling the lengthy disputes and setbacks that preceded the Lisbon treaty's entry into force, are reluctant to embark on another process of institutional reform.

But Germany believes a much closer fiscal and political union is needed to ensure the success of painful economic reforms and the long-term survival of the euro currency.

"We need a lasting solution," Schaeuble said.

(Writing by Gareth Jones; Editing by Noah Barkin)