BRUSSELS, Belgium — Top European officials have called on countries that use the euro to surrender more control over their national budgets, a move apparently aimed at easing Germany’s fears of sharing debt burdens with struggling governments like Spain or Italy.
The plan was delivered as a grand vision to save the euro currency from financial disaster and to set up negotiations between leaders Thursday at a European Union summit.
Germany, Europe’s biggest and strongest economy, is increasingly isolated in its refusal to quickly adopt measures such as jointly issued euro bonds, which would see it take on some of the debt risk of financially weak countries. Some experts say such debt sharing is what Europe needs to end its crisis, as it would help defuse the prospect of unaffordable bailouts for Spain or Italy.
But Germany is worried that such debt sharing would tempt financially weak countries to spend irresponsibly once again and not overhaul their economies. Reassuring Berlin that governments would face tough oversight of their budgets would be key to easing Germany’s resistance to debt sharing.
“What is at stake is ... the overall confidence in the euro area and, indeed, in our commitment to the European project,” European Commission President Jose Manuel Barroso told reporters in Brussels. “For a genuine economic and monetary union to be established, I think we need a banking union, a fiscal union, and further steps toward a political union.”
The plan was drawn up by Barroso along with European Council President Herman Van Rompuy, Eurogroup President Jean-Claude Juncker and European Central Bank President Mario Draghi.
It is doubtful whether euro zone governments will be willing to cede control of their budgets and whether citizens of European countries would accept the idea even if their leaders sign off on it.
The plan is to be debated by leaders from around Europe at a summit Thursday and Friday in Brussels.
“I don’t think we’ll get anything that sweeping this week,” said Sebastian Dullien, senior policy fellow at the European Council on Foreign Relations in Berlin. “There had been expectations of a breakthrough, but Germany is not ready to take the steps that are necessary.”
On Monday, Spain requested financial help to recapitalize its banking industry, and yields on Spanish and Italian government bonds are rising toward levels that forced the governments of Greece, Portugal and Ireland to seek bailouts. But Spain and Italy are widely considered too big to rescue - even for Germany.
The plan proposes a “medium term” move toward euro bonds, as well as creating a banking union with a single authority. This authority, probably the European Central Bank, would have the power to shut insolvent banks and insure deposits, with help from Europe’s permanent bailout fund.
Though the plan is similar to those put forward by the International Monetary Fund and French President Francois Hollande, it was not embraced by Germany.
Chancellor Angela Merkelsaid Tuesday afternoon that she would not accept full debt sharing “as long as I live.”
Merkel told lawmakers of her ruling coalition she “doesn’t see” shared debt happening in the euro area, according to Steffen Seibert, her chief spokesman.
“The chancellor made it clear that even within Germany after 60 years there isn’t joint liability, and that she doesn’t see it in Europe either,” Seibert said in a text message Tuesday after Merkel briefed lawmakers privately in Berlin.
Despite her strong words, Merkel has during the course of the European crisis accepted measures she had previously ruled out.
She had opposed having a permanent rescue fund for Europe, for example, before accepting it.
Even if rejecting euro bonds in all but the longest time frame is only a negotiating stance, it is clear that Merkel and her finance minister, Wolfgang Schaeuble, oppose debt sharing until countries have carried out overhauls or credibly committed to do so, and the eurozone has become better integrated than it is now. It is less clear how they believe the monetary union can survive its current stress to get to that point.
Merkel has said the solution to the crisis lies in “more Europe” in the form of better central controls.
Analysts were skeptical that the plan released Tuesday would lead to a concreteplan at the summit.
“Such proposals are just bureaucratic fine-tuning, rather than game-changing policies that will result in debt mutualisation and a banking union,” said analyst Neil MacKinnon of VTB Capital.
“As a result, the EU Summit will likely produce rehashed plans for closer fiscal integration and a banking union but without any substantive detail of how it will actually be put into practice.”
Though many Europeans will be opposed to the idea of surrendering control over their budgets, their governments all agreed to abide by a 3 percent deficit limit when they joined the single currency.
After multiple violations of the limit - by Germany and France in early 2000s, by a host of countries in the wake of the 2008 financial crisis, and by Greece the whole time - the 3 percent limit was reaffirmed in a new pact signed in January but not yet ratified. That pact also obliges eurozone countries to submit preliminary budgets to Brussels each year.
The latest plan published Tuesday was short on detail, but appeared to propose an even closer oversight of national budgets: “upper limits on the annual budget balance and on government debt levels of individual member states could be agreed in common,” it said. Then, a “euro area level” authority could “require changes” to budgets of countries that stray.
At the end of the report, Van Rompuy volunteered to develop a “specific and time-bound road map for the achievement of the genuine economic and monetary union” by December.
Information for this article was contributed by Toby Sterling, Don Melvin, Angela Charlton and Juergen Baetz of The Associated Press; by Tony Czuczka of Bloomberg News; and by Anthony Faiola of The Washington Post.
Front Section, Pages 1 on 06/27/2012