Euro-tsar to have veto powers on national budgets, Schaeuble says

Outlining the proposals to journalists on his flight returning to Berlin from the annual meeting of the International Monetary Fund and World Bank in Tokyo on Tuesday (16 October), Germany's finance minister said that his leader, Angela Merkel, was fully behind him.

"When I put forward such proposals, you can take it as a given that the chancellor agrees," he said.

Schaeuble also wants the currency commissioner to have similar status to the competition commissioner, who has a mandate to make decisions on EU competition policy without the agreement of the rest of the college of commissioners, arguing that this independence would "depoliticise" the role and improve decision making.

It would also create two tiers of MEP within the European Parliament, with decisions relating to the eurozone being made only by MEPs from countries using the euro.

The question of creating a special committee for the eurozone has support from some MEPs, and was suggested by the likes of Pervenche Beres, the French centre-left chairwoman of the employment committee, in 2011, but is widely seen as a divisive step by deputies.

The plans would built on the six legislative files on economic governance agreed by the 17 eurozone countries in 2011 and came into force in January.

They are now required to present national budgets to the commission to show how they intend to meet debt and deficit reduction targets.

However, while the commission has the power to ask for additional tax rises or spending cuts to meet budget targets and to impose fines on countries which fail to deliver, it does not have formal veto powers.

Schaeuble's salvo is the latest sign that Germany is prepared to deepen fiscal and political integration and builds on proposals already agreed by Merkel's governing Christian Democrat party (CDU).

However, with Merkel finding it increasingly tough to force measures relaxing the terms of bailout conditions and increasing the firepower of the EU rescue fund, the ESM, through the Bundestag, her government is only offering the carrot of deeper European integration in exchange for strict supervision powers at EU level.

Schaeuble's suggestions come as EU leaders prepare for Thursday's summit in Brussels.

Alongside discussions on the commission proposals to establish the European Central Bank as the single supervisor of the eurozone's banking sector, politicians are also expected to focus on Spain's solvency.

Despite informally requesting up to €100 billion to support its private banks, Spain is widely expected to request a formal bailout before the end of 2012.

Leaders will also discuss European Council President Herman Van Rompuy's "ideas paper" which was sent to national capitals last week.

The Van Rompuy paper also raised the possibility of having a finance minister for the eurozone, as well as a special budget, alongside the prospect of establishing new EU-level instruments to ease debt financing.

The mooted instruments include short-term eurobills and a "debt redemption fund" first proposed by a German advisory panel of economic experts.