Germany cannot decouple from Europe and the global economy, Chancellor Angela Merkel said Tuesday. Germany is not an island, but a strong exporting nation, she said at a conference organized by the German Industry Association in Berlin. She observed that there is a lack of confidence in financial markets about the ability of the governments to repay its debt. It would have been better if the European Court of Justice had been granted powers to monitor the fiscal pact, Merkel noted. She said the member countries should do more to reduce their unit labor cost, instead of demanding Germany to raise its cost so as to lower imbalances in the euro area. Merkel held up the proposals for creating a banking union for the bloc. She also called for stronger bank supervision. The European Commission early this month proposed to give sweeping powers to the European Central Bank to overview of some 6,000 banks across Europe. The commission expects to set up the single supervisory mechanism in place by January 1, 2013. Merkel and French President Francois Hollande meeting over the last weekend highlighted the disagreement on the schedule to establish banking union. Hollande said it is helpful to establish supervision "the earlier the better", while Merkel prefer to see the process moving step by step. Merkel is holding a meeting with European Central Bank President Mario Draghi in Berlin today.