ECB chief urges agreement to keep Britain in European Union

By John O'Donnell

FRANKFURT (Reuters) - The head of the European Central Bank called for a solution to keep the United Kingdom in the European Union, saying that such an agreement alongside tighter integration of the euro zone would bolster confidence.

Mario Draghi made the comments to the European Parliament as British Prime Minister David Cameron sought reforms of the bloc ahead of a referendum that will determine Britain's membership of the European Union.

The frank remarks underscore the ECB's concerns about any such splintering of the European Union, where 19 members including France and Germany use the euro currency.

"A solution that would anchor the United Kingdom firmly within the EU while allowing the euro area to integrate further would boost confidence," he said, also urging integration in the euro zone.

"Citizens and markets are too often unsure about our capacity to act jointly in a spirit of common responsibility. We should prove them wrong," he said.

Earlier on Monday, the European Union warned Britain that any breakthrough in talks on a better membership deal would have to be hard-won after senior officials were given an extra 24 hours to iron out differences.

Cameron and European Council President Donald Tusk left a dinner on Sunday saying they had failed to reach a deal, and the two sides were somber in their assessments of how the negotiation stood on Monday.

Euroskeptic British lawmakers said the divergence was being played up to make an eventual agreement seem like a triumph, but EU officials poured some cold water on what Britain had called a "significant breakthrough" on measures to curb immigration.

Separately, Draghi said the ECB will contribute its share to helping the economic recovery, warning, however, of threats to the economy including from emerging markets.

"Growth prospects are slowly improving in advanced economies, but the outlook in emerging markets is more subdued. Overall, growth is low by historical standards," Draghi said.

(Editing by Maria Sheahan)

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