A British Treasury official, responding to reports of Merkel's support a European-wide levy, said the UK government remains steadfastly opposed and would block any move by the European Union to introduce such a tax.
Speaking in Frankfurt, Merkel said: "The federal government, as agreed with the opposition, will campaign for [a financial transaction tax]." She added that Germany needed both functioning banks and justice in the financial sector.
A media report at the weekend that Merkel is not serious about implementing a European financial transaction tax has angered opposition parties and threatens to undermine an initial deal struck last week with the opposition over the EU's planned fiscal pact.
Der Spiegel weekly reported on Sunday that Merkel's chief of staff, Ronald Pofalla, had said such a tax would not get passed in the current legislative period so the centre-right coalition could support the idea in principle knowing it would not have to act on it anytime soon.
The centre-left Social Democrats (SPD) have linked progress on the tax as well as growth-boosting measures to their approval for the fiscal pact and for the euro bailout fund, the European Stability Mechanism (ESM).
Parliamentary leaders were expected to discuss a possible deal before party chiefs meet with Merkel on Wednesday.
Government spokesman Steffen Seibert said Merkel was convinced of the need for a European financial transaction tax and would raise the issue at a meeting in Rome on 22 June with the leaders of Spain, France and Italy.
“François Hollande can also be expected to support this issue," Seibert said, referring to the French president.
But British Prime Minister David Cameron has spoken out against such a tax, and a Treasury spokesman yesterday reiterated the government’s opposition.
"The UK government is against an EU-27 financial transaction tax and, if necessary, we would use our veto," the spokesman said.
Britain has remained steadfast in its opposition to any transaction tax in Europe, unless it was implemented globally.