BERLIN (Reuters) - Germany's vice chancellor has spoken out for a "federalization" of Ukraine once fighting between Ukrainian and Russian separatist forces in the eastern part of the country has ended.

Chancellor Angela Merkel said, however, that Sigmar Gabriel meant decentralisation.

His comments raised eyebrows because of his use of the word federalization, which is a sensitive term in Ukraine.

In an interview with the Welt am Sonntag newspaper released on the same day that Merkel visited Kiev for talks on ending the crisis, Gabriel said the priority was to stop a direct military confrontation between Ukraine and Russia.

"Beyond that, we have to develop an idea about the reconciliation process that could be introduced after the end of the military conflict in East Ukraine," said Gabriel, leader of the Social Democrats who share power with Merkel's conservatives. Gabriel is also Economy Minister.

"The territorial integrity of Ukraine can only be maintained if an offer is made to the areas with a Russian majority," Gabriel was quoted as saying.

"A clever concept of federalization seem to be the only practicable way," he said, adding that a ceasefire was the first step and that still appeared to be a long way away.

During a news conference with Ukrainian President Petro Poroshenko, Merkel said what Germans understood by federalism was seen very differently in Ukraine where it was linked to a greater degree of independence "that we don't want at all".

Pro-Russian media have in the past called pro-Moscow separatists supporters of federalization.

"What we call federalism is decentralisation," said Merkel, when asked about Gabriel's remarks. She said she supported Poroshenko's plans to give more responsibility to local authorities as part of a diplomatic solution to the conflict.


(Reporting by Madeline Chambers; Editing by Angus MacSwan)