A spokesman for German Chancellor Angela Merkel (pictured) has promised to overturn a court ban on circumcisions. Reuters

German Chancellor Angela Merkel has hinted that Europe might become a "United States of Europe" after advocating a "fiscal union" policy within the eurozone.

It would involve implementing firm rules on tax and spending for eurozone governments with central banks acting together to decide interest rates and other monetary regulations.

In her speech to the Bundestag Friday, Merkel also said she wants the European Courts of Justice to be empowered with sanctions should governments behave irresponsibly and borrow beyond their means.

It is the clearest indication yet that the eurozone could be governed under a federal economic law that would bind all members of the single currency together, creating what many already call "The United States of Europe."

Economics journalist Steve Evans told the BBC, "Merkel wants the economies unified with very tight rules from the centre."

The chancellor delivered her comments to the German Parliament Friday morning with the markets speculating that she would back down from her refusal to let the European Central Bank to act as the "lender of last resort".

But instead, Merkel showed no such signs and called for "greater integration within Europe".

"We need budget discipline and an effective crisis management mechanism," she said. "We need to change the treaties or create new treaties."

Evans said: "People have said that there are 10 days to save the euro, which would mean a treaty change, but you don't negotiate a treaty within that time frame."

Merkel has ruffled feathers with leaders of other EU nations by refusing to give in to international pressure over the role of the ECB, with many Germans fearing a looser monetary policy would cause a return to the 1920s hyperinflation under the Weimar Republic - one of the darkest periods of their history.

Instead the German chancellor will advocate a "new phase of European integration" at the EU summit next week in a "make or break" week for the euro.