Berlin

CHANCELLOR Angela Merkel said German-French proposals for the euro area won't lead to a "debt union" and rejected unilateral measures to curb migration as she headed to a summit with other European Union leaders.

In a speech to the lower house of parliament in Berlin, Ms Merkel also reiterated a commitment to boosting defence spending and flagged trade conflict with President Donald Trump's administration as a summit topic, saying leaders should discuss how to engage the US in talks "to avoid further tariffs and thus further steps toward a trade war."

As a clash over migration threatens the stability of her governing coalition, Ms Merkel said on Thursday she doesn't expect EU leaders to agree on a comprehensive migration plan this week.

Ms Merkel's accord with French President Emmanuel Macron on a euro-area budget also faces criticism from some in her party bloc, prompting her to push back in her speech.

"Of course the rules apply: everyone needs to stick to the agreed rules, every member country is responsible for its own budget," Ms Merkel said. "There will be no debt union."

Looking ahead to a North Atlantic Treaty Organization summit in July, Ms Merkel reminded lawmakers that an alliance agreement in 2014 to boost capabilities was in part a response to Russia's annexation of Crimea. She renewed her commitment to lifting German defence spending to 1.5 per cent of gross domestic product by 2024.

While that's less than demanded by Mr Trump, Ms Merkel said Nato "remains central to our security".

The German leader devoted long stretches of the speech to migration, where a clash over border security with Bavaria's ruling Christian Social Union party, which helps secure her government's parliamentary majority, has triggered one of the biggest crises of her almost 13 years in power.

Departing from her focus on policy details, she cited two cases that provoked populist outrage and newspaper headlines this month: an Iraqi immigrant suspected of slaying a 14-year-old German girl and the allegedly slow process of deporting Osama bin Laden's former body guard from Germany. "We can't just let that happen," she said.

While suggesting that Germany needs to further reduce asylum numbers, Ms Merkel said the refugee crisis had abated and cited a series of EU measures to block refugees at the union's outer borders as the model for further action, including steps to help Italy.

"Europe faces many challenges, but migration may well turn into a question of the European Union's destiny," Ms Merkel told lawmakers.

The EU needs to "tackle it in a way that people in Africa and elsewhere believe we are being guided by values and that we're committed to multilateralism, not unilateralism," she said. BLOOMBERG