Germany wants to set up a new European Union fund to help pay unemployment benefits across the bloc, according to proposals leaked to the German press on Wednesday.

The new fund, paid into by all EU members, would lend money to member states suffering from high unemployment to help them pay benefits to their citizens. Member states would have to pay back the loans after five years.

The plans, which emerged in a government working paper leaked to Handelsblatt newspaper, are the first details to emerge of a scheme proposed by Olaf Scholz, the German finance minister.

Mr Scholz first proposed an unemployment insurance scheme as part of Eurozone reforms over the summer and is set to discuss his proposals with EU finance ministers in December.

They are likely to attract countries such as Greece which have suffered high unemployment rates in recent years and blame Germany for imposing harsh conditions on a bailout during the Euro crisis.

But their chances of making it into European law may be limited. Mr Scholz is already facing considerable opposition within the German government from his coalition partner, Angela Merkel’s Christian Democrats (CDU).

What Mr Scholz is proposing is a reinsurance fund to bolster existing national unemployment schemes rather than replace them.