The European banking union is "crucial" but national governments in Europe need more decision-making powers, the Dutch Prime Minister told CNBC.
Mark Rutte said he was "not in favor" of a political union in Europe. Banking union was, however, a necessary step.
"I think the banking union is crucial because we have very big banks so we should not deal with them at a national level. So I am a big fan and very much in favor of the banking union. I am not in favor of a political union," Rutte told CNBC in a TV interview.
"We should do much more at a national level and this is why we…started this debate on what should be done in Brussels, what should be done in the national capitals. And this makes Europe more relevant."
The comments come amid fierce debate over the power that lawmakers in Brussels have over national governments. Britain is one of the staunchest critics of the European Union and could hold a referendum next year to negotiate the country's exit.
However, Rutte also said that the benefits of European Union (EU) membership must be told in order to counter a rising wave of right-wing populist parties on the continent.