Berlin wants "decisive step" towards fiscal union

Germany urged its European partners on Wednesday to agree to cede control over their budgets to a central authority in Brussels, setting up a clash with France and other single currency members at a summit of the bloc's leaders this week.

At a briefing in Berlin before the Thursday-Friday summit, a senior aide to German Chancellor Angela Merkel also rebuffed pressure for quick moves to create a pan-European bank supervisor.

The French and southern European countries want the new supervisory body to be up and running by January, in part because that would be a trigger for Europe's new rescue fund, the ESM, to begin injecting aid directly into struggling banks.

But Berlin has made clear repeatedly in recent weeks that the January deadline, floated by European officials at a summit in June, is unrealistic.

Instead, Merkel's government is trying to shift the debate towards closer fiscal integration, a sensitive subject in capitals like Paris.

On Tuesday, Finance Minister Wolfgang Schaeuble proposed creating a new "currency commissioner" with power over national budgets, an idea the senior official said Merkel supported.

"It is important for us, on the question of economic policy coordination, to make a decisive step forward," the official said.

"If the European Commission is to receive a stronger role, then the question must be answered how this can be done in a sensible, effective, rapid way. A possible answer to this is a currency commissioner with a high level of autonomy."

A second senior official added: "The chancellor and the finance minister have the exact same analysis of what led to the problems in Europe and the same analysis of what kind of reforms are necessary to solve these problems."

The officials made clear that decisions on closer economic coordination were not expected until an EU summit in December at the earliest.

In addition to closer coordination in the fiscal and banking spheres, leaders are also expected to discuss Spain, which appears to be moving closer to requesting aid from the ESM, most likely in the form of a precautionary credit line.

The first official disputed that Berlin was trying to dissuade Madrid from seeking support, saying it was "not Germany's role to give Spain a red or green light".