Germany's Gabriel says EU break-up no longer unthinkable

BERLIN (Reuters) - Germany's insistence on austerity in the euro zone has left Europe more divided than ever and a break-up of the European Union is no longer inconceivable, German Vice Chancellor Sigmar Gabriel told Der Spiegel magazine.

Gabriel, whose Social Democrats (SPD) are junior partner to Chancellor Angela Merkel's conservatives in her ruling grand coalition, said strenuous efforts by countries like France and Italy to reduce their fiscal deficits came with political risks.

"I once asked the chancellor, what would be more costly for Germany: for France to be allowed to have half a percentage point more deficit, or for Marine Le Pen to become president?" he said, referring to the leader of the far-right National Front.

"Until today, she still owes me an answer," added Gabriel, whose SPD favours a greater focus on investment while Merkel's conservatives put more emphasis on fiscal discipline as a foundation for economic prosperity.

The SPD is expected to choose Gabriel, their long-standing chairman who is also economy minister, to run against Merkel for chancellor in September's federal election, senior party sources said on Thursday. [nL5N1EV4PX]

Asked if he really believed he could win more votes by transferring more German money to other EU countries, Gabriel replied: "I know that this discussion is extremely unpopular."

"But I also know about the state of the EU. It is no longer unthinkable that it breaks apart," he said in the interview, published on Saturday.

"Should that happen, our children and grandchildren would curse us," he added. "Because Germany is the biggest beneficiary of the European community - economically and politically."

(Writing by Paul Carrel; Editing by Stephen Powell)