Van Rompuy paper floats eurozone budget, parliament

Drafted with the heads of the EU commission, European Central Bank and Eurogroup of finance ministers, the paper proposes "a central budget for the euro area" in order to "deal with asymmetric shocks and help prevent contagion."

It also speaks of "limited common debt issuance." This should only occur "as long as the risk sharing is accompanied with commensurate steps towards common decision-making on budgets that safeguard against moral hazard" - wording that could have come straight out of Berlin.

The paper raises questions about the coordinated issuance of sovereign debt. "Could it include requiring approval for debt issuance beyond the limits defined in fiscal programmes or assigning such debt issuance a junior status?"

A more controversial idea for the 10 EU countries outside the eurozone is to have a parliamentary assembly formed exclusively of members from the 17 euro nations. The paper refers delicately to "dedicated accountability structures specific to the euro area" once there is more eurozone integration.

On the banking sector, Van Rompuy asks how the bailout fund will be used to directly recapitalise banks and whether it can also serve as a backstop to guarantee people's savings when a bank goes bust.

An EU summit on 18-19 October is set to endorse the parts of the paper which are doable without changing the EU treaties, while the more long-term goals of political union needing a convention, new treaty and referendums will be left for the December summit.

An attempt to deal with the German taboo of debt mutualisation and France's no-go area of further sovereignty transfers to Brussels was made in June when Van Rompuy first tabled a plan for deeper eurozone integration.

The only possible compromise at the time was to endorse common banking supervision in return for the German concession of granting troubled banks direct access to the eurozone bailout fund (ESM), a deal ultimately meant to help Spain lower its debt.

But as the crisis continues and markets doubt the results of each EU summit, more steps are needed towards further eurozone integration.

A senior eurozone official told this website in an interview earlier this month that the views of France and Germany are no longer so divergent.

"You will be surprised in the autumn by the degree of movement that will have taken place in some member states," said Thomas Wieser, who prepares the meetings of eurozone finance ministers.