The leading figures of the eurozone on Tuesday issued a report called "Towards a genuine economic and monetary union," saying it could help pull the bloc out of its debt difficulties and secure the longer-term future of the single European currency.
Leaders of the eurozone's "Big 4" - France, Germany, Italy and Spain - said in the document that there was an "essential" need for "effective mechanisms to prevent and correct unsustainable fiscal policies."
The paper has been submitted to the bloc's 27 capitals, and contains suggestions from European Council President Herman van Rompuy, European Commission President Jose Manuel Barroso, European Central Bank (ECB) boss Mario Draghi and the head of the Eurogroup Jean-Claude Juncker.
"We need a banking union, a fiscal union and further steps towards political union," Barroso told a conference Tuesday. "The first of these building blocks that can be achieved quickly without treaty change is an integrated financial framework - a banking union."
The proposal suggests that Draghi's Frankfurt-based ECB would be tasked with banking supervision across the 17-member eurozone, while the London-based European Banking Authority would oversee banks in the remaining 10 EU countries.
Tuesday's report offered no concrete timeline for its suggestions, indicating that a grand roadmap might be charted by the end of the year.
The calls for greater coordination of banking and fiscal policies tie in with demands from German Chancellor Angela Merkel, who sees such an approach as the key to staving off the so-called debt crisis.
Sovereignty at stake?
The goal of the report is to give teeth to new EU policies such as the fiscal pact - an agreement whereby member states agree to keep borrowing within pre-existing limits, or face sanctions.
"The issuance of government debt beyond the level agreed in common would have to be justified and receive prior approval," the report said, adding that those breaching the rules might be forced to rewrite their budgets. The UK and the Czech Republic have not signed up to the deal, saying it represents too great an imposition on national sovereignty.
Merkel has often said that integration of fiscal policy was necessary before the eurozone could consider adopting so-called Eurobonds, a system where eurozone countries mutually guarantee each other's sovereign debt.
"Steps towards the introduction of joint and several liabilities could be considered as long as a robust framework for budgetary discipline and competitiveness is in place to avoid moral hazard and foster responsibility and compliance," the EU leaders wrote.
Barroso told reporters that the bloc needed to act in order to stave off its economic problems.
"This crisis is the biggest threat to all that we have achieved through European construction over the last 60 years. Faced with this stark reality, standing still is not an option. A big leap forward is now needed," the European Commission president said.
National leaders from EU countries convene in Brussels on Thursday for their monthly summit. They are meeting on the same week that Spain formally requested help for its banking sector and Cyprus announced that it intended to seek emergency loans. These two countries follow Greece, Ireland and Portugal, who have already requested emergency loan pacakges - often called "bailouts" - from their eurozone partners and the International Monetary Fund.
msh/jm (AFP, dpa, Reuters)