German Chancellor Angela Merkel suggested Saturday the European Investment Bank (EIB) could be strengthened and EU infrastructure funds used more flexibly to help spur economic growth in Europe.

"I can imagine that we could further strengthen the capabilities of the European Investment Bank (EIB)," Merkel told the Leipziger Volkszeitung newspaper.

Merkel also backed a more flexible use of European Union "structural funds'" earmarked for infrastructure, training and other areas, saying they could give a boost to small and medium-sized firms.

However, she said there could be no question of renegotiating a "fiscal compact" on budget discipline agreed by 25 of the EU's 27 member states last December. The deal is "not open to new negotiations" Merkel said.

"The fiscal pact is negotiated, it was signed by 25 government leaders and has already been ratified by Portugal and Greece," she added. "Parliaments across Europe are on the verge of passing it. Ireland is having a referendum at the end of May."

Merkel acknowledges the need for growth, but insists that deficits must be trimmed first to overcome the debt crisis and return to a stable path of growth.

French presidential vote

Her comments Saturday were part of the international discussion ahead of presidential elections in France next weekend on May 6 as well as locally in Germany itself shortly afterwards.

French polls indicate a win for Socialist candidate Francois Hollande who has criticized Merkel's emphasis on budget cuts and structural reforms. Hollande has also called for a more robust financing role for the EIB and the more efficient use of EU structural funds.

Hollande welcomed the latest comments from the German chancellor saying he was pleased she had “moved” on the question of growth within the EU and looked forward to her “moving still more” after May 6. If Hollande does win, it would be the first time since Francois Mitterrand left office in 1995 that France has a Socialist president.

EU finance ministers are due to discuss the EIB issue at their next meeting in mid-May.

jm/pfd (Reuters, AFP)