Merkel supports European Monetary Fund idea

BERLIN (Reuters) - German Chancellor Angela Merkel backs the idea of a European Monetary Fund on Tuesday and said she could imagine creating a combined European finance and economy minister, signalling a willingness to deepen euro zone integration.

Merkel said she supported the "very good idea" floated by her finance minister, Wolfgang Schaeuble, to turn the euro zone's rescue fund, the European Stability Mechanism (ESM), into a European Monetary Fund.

"It could make us even more stable and allow us to show the world that we have all the mechanisms in our own portfolio of the euro zone to be able to react well to unexpected situations," she told reporters.

Signalling she is ready to press ahead with deeper European integration, Merkel said she did not rule out a French idea to have a common euro zone finance minister.

"I could also imagine a (combined) economy and finance minister," she said, adding that this could allow for better coordination on budget and economic policies.

(Writing by Paul Carrel; Editing by Caroline Copley)