* Schaeuble wants currency commissioner with budget powers
* German minister urges change to European Parliament voting
* Merkel "somewhat more cautious" on Schaeuble proposals
ABU DHABI, Oct 16 (Reuters) - German Finance Minister Wolfgang Schaeuble has called before an EU summit this week for a leap forward in European integration, saying the bloc needs a commissioner with power over member nations' budgets and reform of European Parliament decision-making.
Such reforms would accelerate the trend towards a two-speed Europe whose inner core would be the euro zone, spurred towards closer union by its three-year-old sovereign debt crisis.
Schaeuble, a long-time advocate of closer EU integration who is not shy about voicing his personal views, said he had spoken to Chancellor Angela Merkel about his proposals and that she was "somewhat more cautious".
"We must now make bigger steps in the direction of a fiscal union," Schaeuble told reporters on his way back from a trip to Asia. "We must use this chance."
Some of Schaeuble's ideas are likely to stir unease even within the euro zone.
He said a new "currency commissioner" should have the power to reject national budgets that were not in line with the bloc's strict fiscal rules, without specifying whether such a figure should have the power to impose penalties.
The model for the position would be the EU's competition commissioner, who Schaeuble said was "feared in the whole world".
He also called for more flexible voting arrangements in the European Parliament to accommodate closer integration between euro zone states.
European officials are looking for ways to boost the democratic legitimacy of a closer union, but have run up against the dilemma that the European Parliament includes countries from outside the euro zone.
"In the European Parliament lawmakers only from countries directly affected by a given issue should vote on it," Schaeuble said.
Such proposals could struggle to win acceptance in countries such as France, reluctant to surrender more sovereignty to EU institutions, while economies such as Greece, reeling from German-backed austerity programmes, will be wary of entrenching the power of outsiders to run their financial affairs.
A previous proposal from Schaeuble for a "Sparkommissar", or savings commissioner, was quietly dropped after it stirred fury in Greece and got a cool reception from Germany's other European partners.
European Central Bank board member Joerg Asmussen said he backed Schaeuble's plans to hand more powers to the EU and he particularly supported the proposal to give the "currency commissioner" the right of veto over national budgets if they showed a country was becoming too indebted.
But he told German radio station hr-iNFO that it would be up to the member state to decide how to revise its budget.
Asmussen said Europe should take the first steps towards implementing the plan by the end of the year. "We must produce a roadmap showing what Europe should look like in the next 10 years," he said, warning that the euro zone otherwise ran the risk of becoming increasingly unattractive to investors.
UNITING EUROPE WITHOUT UK
Schaeuble's proposals coincide with a British decision to pull out of a series of EU law-and-order laws, a move that has pleased the influential anti-EU wing of Prime Minister David Cameron's Conservative Party but has put London on a collision course with other member states.
"Britain itself must decide whether it wants to ride along with Europe or stay behind on the platform," said Wolfgang Krichbaum, head of the German parliament's Europe committee and a member of Merkel's centre-right Christian Democrats.
Krichbaum said Schaeuble's proposals did not go far enough, adding that the currency commissioner should be able to impose penalties on recalcitrant countries and that other commissioners should also have greater powers than at present.
Addressing employers in Berlin on Tuesday, Merkel said Germany did not aim to create new divisions in Europe in pressing for greater fiscal and political integration.
"We do not want to split Europe. Everything is being done so that any country which wants to take part in additional measures of integration can join us," she said, adding that the euro zone itself was by no means limited to its current members.
Schaeuble said he wanted EU leaders to discuss his ideas at this week's Brussels summit, adding that they could launch a "convention" by December tasked with drafting a new treaty.
Merkel has previously said she would like the EU's December summit to agree a date for the start of a convention.
Many member states, recalling the lengthy disputes and setbacks before the EU's current Lisbon treaty came into force, are reluctant to start more institutional reform.
But Germany believes a much closer fiscal and political union is needed to ensure the success of painful economic reforms and the long-term survival of the euro currency.