German and French officials have discussed plans for a radical overhaul of the European Union that would involve setting up a more integrated and potentially smaller euro zone, EU sources say. "France and Germany have had intense consultations on this issue over the last months, at all levels," a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.

German Chancellor Angela Merkel could face another showdown with euro rebels in her coalition when parliament votes Wednesday on plans to boost the firepower of the euro-zone bailout fund, potentially weakening the chancellor in already difficult negotiations with European Union leaders at a summit planned for Wednesday evening, The Wall Street Journal reported. As European officials rushed to thrash out the details of a comprehensive response to the euro zone debt crisis by Wednesday, opponents of any further euro-zone bailouts within Ms.

Decisions taken over the coming week will define Europe's destiny for generation, The Wall Street Journal Agenda blog reported. For the past 60 years, the European Union in its various guises has helped to ensure peace and prosperity.

Disagreement between France and Germany may prevent eurozone leaders from reaching a crucial deal on a second rescue package for Greece this weekend, a person familiar with the negotiations said Tuesday, The Washington Post reported on an Associated Press story. A common position of the two biggest eurozone economies is seen as a precondition for reaching agreement between all 17 countries in the currency union at a crisis summit on Sunday.

German bankers railed Thursday against European Union proposals that would force the Continent's banks to raise capital and further write down the value of Greek debt on their books, arguing that the moves themselves could force the sort of financial crisis that Europe's leaders are working to avoid, The Wall Street Journal reported. Deutsche Bank AG's chief executive, Josef Ackermann, cautioned Thursday that a credit crunch could result if Europe's leaders enact higher capital levels for banks and big haircuts on sovereign debt.

The German parliament has voted by an overwhelming majority in favour of measures bolster the €440bn eurozone rescue fund, and give it new powers to buy bonds and recapitalise weak banks, in a move that lifted financial markets and boosted the euro, the Financial Times reported. The decision was greeted in Brussels as removing a big potential road block to further action to deal with the debt crisis, although several more eurozone parliaments still need to sign off on the package.

Germany will be subsidising its weaker eurozone partners for a lifetime and Greece, Italy and Portugal face big changes if the European currency is to survive, Foreign Secretary William Hague said in an interview published on Wednesday, Reuters reported. Britain had been vindicated for its decision not to join the 17-nation currency club but was very concerned about the euro breaking up, Hague told the weekly Spectator magazine.

German Chancellor Angela Merkel may fall short of a majority in her own coalition for a crucial reform of the euro zone rescue fund meant to stop a sovereign debt crisis spreading, in what would be a severe blow to her authority, a test vote showed, Reuters reported. Talk of proposals to leverage up the 440 billion euro bailout fund to multiply Europe's financial firepower lifted global stocks on Tuesday but made it harder for Merkel to unite her fractious centre-right coalition.

As the crisis engulfing the 17-nation bloc escalates, Germany continues to press hard for Greece, the region’s worst fiscal miscreant, to pay a high price for breaking the rules, the Financial Times reported. From the federal president down, conservative thinkers have denounced the extraordinary steps taken by the European Central Bank to prevent financial meltdown. Jürgen Stark, one of their leading representatives, this month quit the ECB’s executive board in protest.

Germany’s bad banks, backed by the state to prevent the collapse of Hypo Real Estate Holding AG and WestLB AG during the credit crisis, would be the hardest hit in the event of a Greek default, leaving taxpayers to shoulder the bill a second time, Bloomberg reported. Hypo’s FMS Wertmanagement, with 8.76 billion euros ($12 billion) in Greek sovereign investments and loans, and WestLB’s Erste Abwicklungsanstalt, with 1.21 billion euros, bear more than half of German banks’ Greek debt, according to data compiled from company reports and statements.