Since the election of Socialist Francois Hollande as French president on Sunday, Merkel has come under pressure to relax the austerity measures that, as leader of Europe's biggest economy, she has prescribed as the remedy for the euro zone debt crisis.

But Germany's centre-right leader, standing her ground, told the Bundestag (lower house of parliament) in a speech that reducing debt and encouraging growth were "twin pillars" of European policy, rather than two alternative paths.

"Growth through structural reforms is sensible, important and necessary. Growth on credit would just push us right back to the beginning of the crisis, and that is why we should not and will not do it," she said.

Emboldened by Hollande's victory, Germany's centre-left opposition is calling for a "growth pact" for Europe to be added to the German-led fiscal pact for budgetary discipline which has been signed by 25 European Union countries but has yet to be formally ratified by many parliaments.

Speaking after Merkel, Frank-Walter Steinmeier, parliamentary leader of the Social Democrats (SPD), accused the government of "political lethargy" and said Germany had weathered the euro crisis well because it had introduced "a blend of austerity and growth policies".

(Reporting by Stephen Brown; Editing by Noah Barkin)

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