PARIS, Dec. 5 (UPI) -- German Chancellor Angela Merkel and French President Nicolas Sarkozy Monday revealed a tough revamping of eurozone rules to tackle long-term debt problems.
The joint proposal released after a meeting at the Elysee Palace will be handed to 27 heads of state at a European Union summit in Brussels that begins Thursday, The New York Times reported.
The two leaders are asking for fundamental changes to European Union treaties including sanctions for countries that do not stay within fiscal guidelines, including keeping annual deficits to less than 3 percent of gross domestic product.
"We want to make sure that the imbalances that led to the situation in the eurozone today cannot happen again," said Sarkozy at a news conference after Monday's meeting.
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The proposal covers four main points: Fiscal discipline, leveraging the European Financial Stability Facility to extend its financial clout, agreeing to a disbursement of funds from that account and allowing the European Central Bank to buy Italian and Spanish debt to keep bond markets in check.
For the long-term, however, Germany, Finland and the Netherlands have strongly opposed using the ECB as a backstop for bond markets.
Germany, in general, favors strong fiscal discipline. It also favors rewriting treaties to create sanctions for eurozone members where budgets fail to meet expectations.
Either the European Court of Justice or the European Commission might be selected to enforce the guidelines.
"This package of measures is a proof of our absolute determination to guarantee a stable euro," Merkel said.
Both leaders agree some nations, including those with excessive debts such as Italy and Spain, will have to give up some independence in setting national budgets in exchange for financial support from their wealthier counterparts, The Daily Telegraph reported.
But they disagree on how much autonomy the countries would lose and how monitoring and enforcement of rules would work, it said.
A "grand European bargain" envisioned by Merkel would involve a framework of automatic penalties and oversight through a new "stability commissioner" to keep countries in check.
But Sarkozy argues such policing is severe and could lead to an undemocratic transfer of national sovereignty. He says eurozone members should be granted more discretion over the sanctions.
The Italian Cabinet adopted a $32.2 billion austerity program Sunday to ease economic pressure on the embattled country. Final approval of the reforms in Parliament is expected before Christmas, officials said.
The crisis, which has seen bailouts of Greece, Ireland and Portugal, now threatens to engulf Italy and Spain.
Italy and Spain together have total debts of more than $3.3 trillion, with Italy about to roll over $276 billion in debt in the next six months and Spain, about $150 billion.
