It is time for more Europe, and existing treaties may have to be amended to get there. That was the message Chancellor Angela Merkel delivered in a speech to the German parliament on Wednesday. She also called for tighter rules for those who violate euro-zone deficit rules
EU's Rehn warns pressure on banks is rising
* Rehn says financial stress in euro area is serious
* Remarks come after ECB boosts liquidity for banks
(Recasts; adds details on bank liquidity, background)
BRUSSELS, Sept 7 (Reuters) - Funding pressures for European banks have intensified and the situation on financial markets is serious and spilling over into the economy, the European Union's top economic official said on Wednesday.
"Stress in financial markets increased over the summer, leading to substantial volatility and occasional turbulence. The rough ride in the financial markets is a real test time for the euro-area," Olli Rehn, the EU's economic and monetary affairs commissioner, told a seminar at the European Parliament.
Rehn's remarks come as banks grow increasingly nervous about lending to each other amid worries about the health of highly indebted states in the euro zone. These jitters prompted the European Central Bank to make long-term, six-month money available to them last month.
"The situation is serious and there's no need to pretend otherwise," he said. "At the same time, funding pressures in the EU banking sector have risen."
As well as making longer-term funding available, the ECB extended its promise to provide unlimited cash to banks until mid-January.
The euro zone's central bank has attempted twice to pare back lending on financial markets to wean banks off its assistance, but has on both occasions been forced to open the liquidity taps again.
As euro zone officials struggle to finalise details of an agreement struck by their leaders at a July 21 summit -- a deal which was intended to draw a line under the debt crisis, the bloc of 17 nations using the euro face more market attacks.
Rehn said volatile financial markets now threatened the economy.
"The continued financial turbulence is spilling over to and potentially harming the recovery of the real economy," he said.
(Reporting by Robin Emmott and John O'Donnell; editing by Ron Askew)
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