France and Germany have proposed a new EU framework to speed up progress towards a common corporate tax base - something likely to be opposed by Enda Kenny at the EU leaders' summit in Brussels, which starts tomorrow.
The proposal is contained in a letter to the President of the European Council Herman Van Rompuy, and will be discussed when EU leaders begin deliberations tomorrow night.
Ireland's low corporate tax rate has long been an issue with French President Nicolas Sarkozy, who would like to see it raised. An EU diplomat confirmed to RTE News that harmonising the corporate tax base was part of the Franco-German plans.
Meanwhile, reports say six euro zone powerbrokers will meet tomorrow ahead of the summit.
An EU diplomat was quoted as saying that German Chancellor Angela Merkel, French President Nicolas Sarkozy, ECB head Mario Draghi and the head of the euro zone finance ministers Jean-Claude Juncker would take part.
EU president Herman Van Rompuy and European Commission chief Jose Manuel Barroso will also be involved in the pre-summit talks in Brussels.
Markets have been growing more nervous ahead of the summit, after a spokesman for Chancellor Merkel said he expected "very challenging and occasionally very difficult talks" at the summit, while a government source in Berlin said he was "more pessimistic" than last week.
The source said preparatory talks had given the impression that "several partners have not yet understood the seriousness of the situation".
The Franco-German letter to van Rompuy outlines proposals made to amend policies governing the euro zone.
The letter outlines proposals including monthly meetings of euro zone leaders during the crisis, the adoption of legal or constitutional limits on budget deficits and automatic sanctions for states whose deficits exceed 3% of GDP.
The letter said Paris and Berlin hope that all 27 EU members will sign up to the new rules but if not, "states whose currency is the euro should move forward" on their own.
"We are convinced that we must act without delay," the letter said, adding that the articles of a new treaty should be ready by the end of next March.
Two-stage treaty process is floated
Earlier, it emerged that the European Commission has raised the possibility of a two-stage EU treaty change process in order to secure the broad agreement of EU leaders and end the euro zone debt crisis.
It appears this would involve EU leaders agreeing immediate measures - which would not require a referendum - at this weekend's summit, with more substantial changes coming later.
On the eve of one of the most crucial EU leaders summits ever to take place, intense negotiations are underway in order to try and secure a robust agreement which will convince the markets.
The US Treasury Secretary Timothy Geithner was in Paris today, calling for bold action from Europe and expressing confidence that a deal would be done.
But significant gaps remain. France and Germany want a legal commitment from euro zone countries to adhere to fiscal discipline, with the European Court of Justice overseeing this.
But the court's involvement could trigger the need for a referendum, and Ireland, Britain and the Netherlands are reluctant to do that.
A draft document prepared by EU Council President Herman Van Rompuy, seen by RTE News, suggests that Europe's permanent bail-out fund, the ESM, be given a bank certificate so it could access European Central Bank funding. Germany has long opposed such a move.
Today the European Commission hinted at a way out - a two-stage treaty change process, which would probably see measures which do not require a referendum being agreed by EU leaders this weekend, followed by a more robust treaty change later on.
