Merkel under pressure to move on Spain and Italy

This would mean that the eurozone bail-out funds' rules could be changed so as to allow direct money injection into trouble banks.

Spain's planned €100 billion bail-out for its troubled banking sector has failed to impress markets. Bond sales in Madrid at record interest rates in the past week are feeding speculation that a second, full-blown state bail-out will be needed.

The situation is partly due to Germany's insistence that the bail-out passes through the government balance sheets instead of the money being used to directly re-capitalise banks.

The G20 communique also speaks of "important steps towards greater fiscal and economic integration that lead to sustainable borrowing costs."

This is a veiled reference to plans tabled by Italian Prime Minister Mario Monti to allow the existing and upcoming eurozone bail-out funds to buy up bonds of countries under intense market pressure, without having to ask for a bail-out.

"The idea is to stabilize borrowing costs, especially for countries who are complying with their reform goals, and this should be clearly separated from the idea of a bailout," Monti said during a press conference.

According to the Financial Times, Merkel refused the idea during the public G20 session but in informal talks officials said she was more willing to make concessions, although she did not commit to anything.

The bond-purchasing plan will be taken up again at a mini-summit in Rome on Friday between Merkel, Monti, French President Francois Hollande and Spanish leader Mariano Rajoy.

"Italy has launched an idea which is worth looking at," Hollande told reporters in Mexico. "We are looking for ways to use the European Stability Mechanism for this. At the moment it is just an idea, not a decision. It is part of the discussion."

The G20 communique also noted the commitment of eurozone countries to move forward with "the completion of the Economic and Monetary Union" - the German precondition for any concessions on the bail-out funds or the European Central Bank printing more money.

"Towards that end, we support the intention to consider concrete steps towards a more integrated financial architecture, encompassing banking supervision, resolution and recapitalisation, and deposit insurance," the communique says.

It adds that countries with surpluses (Germany) will boost internal demand so as to narrow the gap to deficit countries undergoing structural reforms.

But in a reminder of how limited Merkel's room for manoeuvre is, the German Constitutional Court on Tuesday ruled that the chancellor must keep the parliament better informed whenever new bail-outs are considered.