(Reuters) - German Chancellor Angela Merkel said on Monday she would campaign for a financial transaction tax, addressing concerns among the center-left opposition that her government was only using the issue as a way to get euro crisis legislation through parliament.

The federal government, as agreed with the opposition, will campaign for (a financial transaction tax), Merkel said in Frankfurt, adding that Germany needed both functioning banks and justice in the financial sector.

A media report at the weekend that Merkel is not serious about implementing a European financial transaction tax has angered opposition parties and threatens to undermine an initial deal struck last week with the opposition over the EU's planned fiscal pact.

Der Spiegel weekly reported on Sunday that Merkel's Chief of Staff, Ronald Pofalla, had said such a tax would not get passed in the current legislative period so the center-right coalition could support the idea in principle knowing it would not have to act on it anytime soon.

The center-left Social Democrats (SPD) have linked progress on the tax as well as growth-boosting measures to their approval for the fiscal pact and for the euro bailout fund, the European Stability Mechanism (ESM).

Parliamentary leaders meet on Monday to discuss a deal before party chiefs meet with Merkel on Wednesday.

Andrea Nahles, deputy leader of the Social Democrats, said her party would not agree to the fiscal pact if the cabinet did not re-commit to the tax. The SPD's support is crucial to Merkel, who needs a two-thirds majority in the Bundestag lower house to pass the pact.

Claudia Roth, head of Germany's Greens, also called for the cabinet to make a decision.

(Merkel) needs to make clear that these are real negotiations, she said, adding that any decision needed to stipulate that the tax would be introduced even if it is not approved in all of the EU's 27 member states.

Government spokesman Steffen Seibert told a regular news conference earlier on Monday that Merkel was convinced of the need for a European financial transaction tax and would raise the issue at a meeting in Rome on June 22 with the leaders of Spain, France and Italy.

(French President) Francois Hollande can also be expected to support this issue, Seibert said.