German Chancellor Angela Merkel said on Thursday that the eurozone crisis would dominate next week's G20 summit but warned leaders clamouring for her to take charge that she needed their help.

In a speech to German lawmakers ahead of the meeting of world leaders in Los Cabos, Mexico on June 18-19, Merkel said Europe could not take the easy way out with quick fixes smacking of "mediocrity" that failed to address core problems.

"All those looking to Germany again in these days in Los Cabos, who are expecting a drum roll and the answer... I say to them Germany is strong, Germany is an engine of economic growth and a stability anchor in Europe," Merkel said.

"But Germany's powers are not unlimited," she said, cautioning against counting too much on Germany as the sole crisis fighter in Europe.

"All the (aid) packages will ring hollow if you overestimate Germany's strength," she said, describing the tasks ahead for Europe as "Herculean".

Merkel acknowledged that Germany found itself centre stage as leaders grapple with the incalculable impact of the raging eurozone turmoil on the global economy.

"The debt crisis will be the main issue at the summit," Merkel said.

"Our country will be the centre of attention -- it's a fact, all eyes are on Germany because we are the biggest European economy and a major exporter."

But Europe would only find a way out of the crisis with a strong "political union" that mandated greater fiscal coordination and oversight to put member countries on a "solid and honest foundation", she said.

"Germany is investing its strength and its power, not only for the benefit of the people in Germany but also in the interest of European integration and in the interest of the global economy," she said to applause.

But she said all those calling for Germany to "pour billions into eurobonds, stability funds, European bank deposit guarantee funds" in a bid to calm the markets must focus first on fiscal discipline.

She lent her backing to "a bigger role" for the European Central Bank in overseeing banks to avert further storms in the sector that have posed one of the biggest recent threats to the eurozone.

"We need a more independent supervisory authority," Merkel said in an address to German lawmakers, indirectly criticising the current system based on the European Banking Authority and calling for new powers for the ECB.

Spain, the eurozone's fourth largest economy, was forced last week to accept a 100 billion euro bailout ($126 billion) but even that failed to impress the bond markets and the country's borrowing costs have continued to mount.

Meanwhile Greeks return to the polls on Sunday and may elect a government that rejects the terms of Athens' bailout package, destroying the EU rescue plan.

Merkel said that many of the countries crying out for German action, notably the United States, needed to turn their backs on deficit-spending and start implementing the kind of structural reforms Berlin has put in place.

"Financing growth with new borrowing must stop," she said, calling for joint G20 action on budget consolidation.

Merkel added that China needed to take action on the flexibility of its currency, amid widespread accusations the yuan is undervalued and contributing to major trade imbalances, primarily with the United States.

Germany has come under intense pressure, notably from US President Barack Obama, to do more to put an end to the eurozone crisis as it is seen as a threat to the fragile US recovery and the global economy as a whole.

However Berlin has resisted calls for new European stimulus programmes to promote economic growth, saying that fiscal discipline is the only way to restore market confidence in the eurozone.

Merkel drew unexpected support from US Treasury Secretary Timothy Geithner, who late Wednesday endorsed Germany's call for structural reforms to save the eurozone.

"What Germany is saying is (that) to make monetary union work, (they're) prepared to put a substantial commitment of resources behind this broader endeavor," Geithner said.

"But for that to work, (it) needs to be in support of reforms and changes in the institution ... and that is a very reasonable position."