Germany and France are headed for a "fiscal union." The term, recently brought up by Chancellor Angela Merkel as the new guiding principle for the eurozone, is meant to describe a currency union with standardized budget policies and stronger fiscal discipline among all members.

Merkel also made clear during this week's budget debate in parliament that she foresees a harmonization of workers' rights, retirement ages and tax codes. Along that line, she said Germany and France are hoping to come up with a common corporate tax policy by 2013.

German Finance Minister Wolfgang Schäuble told lawmakers on Friday that the government wanted to "agree on the main features of a real fiscal union for the eurozone... very soon, potentially on December 9" at the next EU summit. Germany wants the bloc's Stability and Growth Pact to be strengthened, forcing automatic sanctions against countries that exceed strict limits for budget deficits.

Merkel and Schäuble reject debt union

German lawmakers approved the 2012 budget on Friday

"We are sticking to this, and if all other countries stick to it as well, then the causes of the sovereign debt crisis will soon be overcome," Schäuble said as parliament approved the 2012 budget. The EU has to fix the problems that caused this crisis, he said, which is why "all quick solutions, like printing money or collectivizing our liabilities without a common finance policy, are the wrong solution." These ideas only minimize the pressure on the hardest-hit countries to actually solve their problems, he added.

Schäuble's comments reiterated what Merkel said after her meeting with French President Nicolas Sarkozy and newly-appointed Italian Prime Minister Mario Monti on Thursday: Germany continues to reject the unlimited power of the European Central Bank to finance governments and the issuance of collective European debt, so-called eurobonds.

Greens see eurobond rejection as political tactic

However there are voices in Berlin that call into doubt the categorical "no" to the disputed eurobond question. Jürgen Trittin, parliamentary leader of the opposition Greens, has already postulated that Merkel's position is nothing but a "dead pledge for the negotiations on changing the Lisbon Treaty."

Schäuble said there are no quick fixes for the debt crisis

The Greens, like the Left party and some members of the Social Democrats, support the issuance of eurobonds, while the leaders of the governing Christian Democrats (CDU) and Free Democrats (FDP) reject it.

However newspapers like the Financial Times Deutschland and the Berlin-based Taggesspiegel report that the coalition rejecting eurobonds is falling apart, above all among the conservative CDU. A sure-fire indication that there may be some truth to that are the loud appeals of the coalition FDP, keeping the government's stance firm. If needs be, the party would "prevent the lasting and unlimited takeover of debts from other countries through eurobonds," FDP vice-chief Birgit Homburger told the daily Bild newspaper. Even European Commission President Jose Manuel Barroso, who has consistently supported eurobonds, could not ask too much of Germany's productivity, she added.

Author: Bernd Grässler / acb

Editor: Andreas Illmer