The European Union today called for sweeping new powers to override national budgets and decide when governments should be placed under the wardenship of Brussels technocrats.
"Without stronger governance, it will be difficult if not impossible to sustain the common currency," Jose Manuel Barroso, head of the executive EU Commission, said of plans presented as a pre-condition for pooled euro zone government borrowings (eurobonds), seen as a way of helping resolve the debt crisis.
Chancellor Angela Merkel immediately repeated Germany's opposition to eurobonds, saying it was an approach which would not work - just as investors shunned an issue of German 10-year bonds, considered the euro zone gold standard.
The proposals, which concern the euro zone, now journey through the EU's 27 member states and the European Parliament.
Barroso argued that to complement democracy at the level of national parliaments, for instance in the setting of annual budgets, a "democracy of the EU" also had to be given its say. Otherwise, he said, Europe would "hand sovereignty to markets."
The EU has rules on annual deficits and cumulative debts but these have been trampled over for years by its governments. This time, the Commission wants the power to send inspectors in to finance ministries around Europe, and demand changes it believes better meet the needs of the common good before funds are legally allocated.
Now the Commission wants states to set up independent councils using external forecasting to agree on spending, taxation and other budget-shaping reforms.
Euro Commissioner Olli Rehn said the right to intervene in a euro zone state's public finances would be awarded when the Commission and the European Central Bank determine that financial stability is at risk.
Pressed to detail the criteria envisaged for making that judgment, he insisted that the EU can't predict "ex ante all the situations where we might need" such surveillance.
Berlin actually wants to go further on surveillance - indeed Germany wants the European Court of Justice to be empowered to pursue the worst offenders.
As well as bailed-out trio Greece, Ireland and Portugal, euro zone giants France, Italy and Spain have each seen their borrowing costs rise on bond markets this year.
Belgium is also in danger amid an 19-month political paralysis that has prevented parties agreeing a government or budget. Germany, though, says jointly-guaranteed eurozone bonds are not the answer, neither now nor in the longer-term.
Merkel said she found it "extremely worrying" and "inappropriate" that the Commission was pressing ahead, underlining: "This will not work." Germany was able to place only €3.6 billion worth of its benchmark 10-year "Bund" from a total of €6 billion on offer.
As Europe's biggest economy and the state with the lowest borrowing costs, Germany worries it would be liable for the lion's share of pooled borrowings - at least until such time as the European Central Bank declares itself a US-style "lender of last resort," a route it also opposes.
France takes a different stance over allowing the ECB to intervene massively, with huge monetisation of debt, which according to some economists is the quickest way to save the euro zone.
Leaders of the 27 EU states are expected to debate the legislative package and related ideas at a December 9 summit. Any change requiring states to bail out partners - beyond purely voluntary action - would involve changes to the EU's treaty.
Meanwhile, Germany's debt agency has blamed nervous markets today after it was forced to retain a huge portion of a new 10-year bond issue as bids fell short. The German Finance Agency called a "reflection of the extraordinarily nervous market conditions."
"It doesn't mean any refinancing bottleneck for the budget," insisted Joerg Mueller, an agency spokesman.
The agency held on to €2.356 billion of the issue, allotting €3.644 billion at an average yield of 1.98%.
This is about twice the average retention rate of about 20%, said an agency spokesman, who could not specify if or when the agency had ever had to retain a larger proportion.
"Regarding the retained market quota, the desired total volume will be reached via sales in the secondary market," the statement said.
However, analysts worried the euro zone debt crisis was beginning to seep into the very core of the 17-nation zone as the euro dropped sharply on the foreign exchange markets after the auction.