UPDATE 1-UK's Hague tells Germans "less is more" on Europe
* UK's Hague says EU "sucks up decision-making"
* Criticisms could further strain ties with Germany
* London rules out joining EU banking union
BERLIN, Oct 23 (Reuters) - Britain's foreign secretary told Germany on Tuesday his country was more disillusioned than ever with the European Union and set out a vision of its future, based on the premise "less is more", that clashed directly with Berlin's plans for the euro zone.
William Hague dashed any hope of a conciliatory message to a key European partner which fears Britain is gradually withdrawing from the EU, saying Britons feel the Union "is a great machine that sucks up decision-making".
"This coalition government is committed to Britain playing a leading role in the EU but I must also be frank: public disillusionment with the EU in Britain is the deepest it has ever been," Hague said in a speech in Berlin.
His criticism, some of the strongest from London in recent months, could further strain ties between Britain and the EU's leading power. Berlin is increasingly irritated by the isolationist instincts of British Prime Minister David Cameron and the bulk of his Conservative lawmakers.
Hague faced direct pleas from his colleagues from Germany and Finland - countries at the heart of the currency union - to sign up to a pan-European banking union, and push for more joint EU foreign and defence policy.
German Foreign Minister Guido Westerwelle warned him that while the EU welcomed dissenting views, the integration process could not wait for doubters.
"All are welcome to contribute their ideas. But if anyone does not want to come along or cannot come along, it will not prevent the rest from going on ahead," said Westerwelle.
"That goes for travel freedom in the Schengen zone, that goes for the common currency and I believe it also goes for common foreign aned security policy," he said.
Finland's Europe Minister, Alexander Stubb, speaking at the same conference, said: "William, please, join the banking union, don't sit on the fence - we need you."
LESS IS MORE
The reply was totally unambiguous.
"To join in a banking union with another currency - the currency of our friends, but another currency - would be an extremely difficult thing to do. That is why we will not be part of the banking union," Hague said.
He argued that national parliaments should have more power instead of beefing up the European Parliament, as Chancellor Angela Merkel has proposed, and said efforts to solve the euro zone debt crisis must not put the EU's single market at risk.
"Some proposals would severely curtail national democracy - issues like national budgets - forever," warned Hague, in what appeared to be a reference to Merkel's "fiscal compact" signed by all 27 EU member states except for Britain and the Czechs.
In contrast to Merkel's mantra that the answer to the euro zone debt crisis is "more Europe, not less Europe", Hague declared: "Sometimes less is more, less is better."
He said Britain - as the second largest net contributor to the EU budget - was at a loss to explain why there should be an increase beyond inflation in the EU's seven-year budget, a package worth around 1 trillion euros ($1.2 trillion).
"The EU would be stronger if it made more sense to people, by only acting where there was clear justification for action at the European level," he said.
Cameron is under pressure to claw back powers from the EU, or even pull Britain out of the bloc altogether, as anti-Europe sentiment mounts among many legislators in his party.
Finland's Stubb emphasised the value that country and the Germans placed on Britain's traditional influence in Europe as a free-marketeering counterweight to more interventionist and less fiscally-disciplined southern states like France.
But Stubb warned that current debate about referendums and treaty change in Europe could "corner" Britain, adding: "I think if the UK is marginalised or it marginalises itself, it will be bad for the UK and it will be bad for the European Union."