BERLIN (AP) — German Chancellor Angela Merkel called Wednesday for banks and other private investors to make a significantly larger contribution to reduce Greece's debt burden, and said Europe must simultaneously make sure that the eurozone debt crisis stops spreading.
Merkel didn't spell out how large a writeoff private bondholders should take, but said the aim of Wednesday's European Union summit must be a solution that allows Greece to cut its debt load to 120 percent of gross domestic product by 2020.
Greece's debt are set to spiral above an estimated 180 percent of its economic output next year.
According to Greece's international creditors, a cut of 50 percent on Greek bonds now would take the country's debt to just above 120 percent of GDP. Greece's private bondholders agreed in July to accept losses of 21 percent on their holdings, and are fiercely resisting EU efforts make them take bigger losses.
Merkel also said that "permanent surveillance" of Greece's budget would be "desirable." Athens' reform efforts have been monitored so far every three months by inspectors from the European Union, European Central Bank and International Monetary Fund.
In a speech to the German parliament, Merkel stressed the need for Europe at the same time to ensure that the crisis doesn't spread yet further, saying that recapitalizing troubled banks is "absolutely necessary."
Europe has bailed out three of small eurozone members — Greece, Portugal and Ireland — but lives in great fear that it cannot bail out the troubled economies of Italy and Spain, the third and fourth largest economies in the 17-nation eurozone.
"Anyone who wants private creditors to participate in debt sustainability must also ensure that a screening off, a protection against the danger of contagion is decided at the same time," Merkel told lawmakers. "Anything else is simply irresponsible."
Merkel also stressed that the EU must be prepared to overhaul its treaties to overcome the crisis for good and ensure a better functioning of the eurozone's 17 nations and the EU's 27 members as a whole.
A future treaty must allow that eurozone countries who are not living up to their fiscal and budgetary responsibilities under the bloc's growth and stability pact be taken to the European Court of Justice, she said.
Merkel was addressing the German parliament ahead of a vote on plans to increase the firepower of the eurozone's bailout fund.
The EU summit in Brussels later Wednesday will consider plans to boost the euro440 billion ($600 billion) bailout fund by offering government bond buyers insurance against possible losses and attracting capital from private investors and sovereign wealth funds.
Merkel said she sees no "better alternative" to the efforts being made to protect the euro. She said anew that "if the euro fails, Europe fails."