Angela Merkel now 'backing EU growth measures'

Angela Merkel strictly opposes the idea of fostering growth through more spending, saying it would only make Europe's debt woes worse (Getty Images)

Germany's opposition leader says that Chancellor Angela Merkel has accepted the need to add a separate set of measures promoting growth to the European Union's treaty enshrining fiscal discipline.

Sigmar Gabriel told reporters after a two-hour closed-door meeting between Mrs Merkel and top politicians that the government has "significantly moved toward accepting a pact for growth and investment".

For Germany to formally approve the so-called fiscal pact, Mrs Merkel's centre-right government needs the support of opposition parties to secure a two-thirds majority in Parliament.

"The government's blockade on this issue has been broken," Mr Gabriel said. "We see a whole range of possibilities alongside the fiscal pact to do something to foster growth and employment in Europe, especially in fighting youth unemployment," he added.

One of Mrs Merkel's top allies, conservative parliamentary caucus leader Volker Kauder, confirmed that both sides will now work out proposals and meet again on June 13, also to tackle "the question how a concrete growth strategy will look like."

Mr Gabriel's Social Democrats - emboldened by similar demands by France's new centre-left President Francois Hollande - have said they would only vote for the called fiscal pact if it is amended to include an economic growth pact.

Mr Hollande's election this month shifted the political tide in Europe away from talk about austerity measures toward ways of fostering growth as Europe is on the brink of a recession, with southern European nations such as Greece, Portugal or Spain particularly hard hit.

Mrs Merkel recently also started talking about spurring growth, although she strictly opposes the idea of fostering growth through more spending, saying it would only make Europe's debt woes worse. Instead, she maintains that growth can be fostered through a more effective use of existing EU funds and implementation of structural reforms.

However, it remained unclear what exactly a growth pact would entail, and whether Mrs Merkel has accepted that more spending might be necessary.

The government wants to pass the legislation on a tight timetable together with a bill for Europe's new permanent rescue fund by the end of June. The legislation for the new firewall, the European Stability Mechanism, must pass by late next month because the ESM is set to start operating on July 1.

The opposition has said that it will vote for the ESM on time, but threatened to block the fiscal pact unless Mrs Merkel makes concessions.

AP