The euro zone's ESM rescue fund will be granted a banking licence, giving it enough fire power to head off the bloc's debt crisis, Italian Prime Minister Mario Monti has said.
German officials have strongly played down the idea that the permanent ESM fund would be given such authority.
The licence would allow it to tap unlimited resources through the European Central Bank's liquidity operations.
Asked if the ESM should be granted a banking license, Mr Monti told a news conference in Finland: "I think this will help.... this will in due course occur."
Earlier, German economy minister Philipp Roesler said that he backs German chancellor Angela Merkel in rejecting the banking licence for the ESM bailout fund.
Mr Roesler, who is vice chancellor to Mrs Merkel, expects the ECB to remain focused on their core task of maintaining price stability.
He said that he, Mrs Merkel and her finance minister agree that such a licence "cannot be our way."
A string of comments by euro zone officials starting last week with ECB President Mario Draghi's pledge that the bank would do "whatever it takes" to preserve the euro raised expectations of decisive action soon by the bank, governments or both.
Govt formally ratifies ESM treaty
Meanwhile, the Government has lodged the instruments of ratification of the European Stability Mechanism treaty with the General Secretariat of the EU Council in Brussels.
It comes after the Supreme Court ruled that the EU's permanent bailout fund is fully compatible with the Constitution.
The ruling cleared the way for the Government to deposit what are called the instruments of ratification with the General Secretariat of the EU Council.
The German Constitutional Court is expected to give its ruling on the treaty on 12 September.
Lagarde says ECB can do more to bolster the euro
International Monetary Fund chief Christine Lagarde has called on the European Central Bank to take further steps to stabilize the economy of the euro zone.
Ms Lagarde told reporters in Washington the world economy is suffering a decline in confidence, driven by doubts about the ability of European and US leaders to manage economic problems.
She said European leaders should maintain a "crisis management mode" as they seek to address the debt problems.
Ms Lagarde's comments come a day before the ECB meets to decide on interest rates.
She noted recent comments by ECB President Mario Draghi, who vowed to do "whatever it takes" to save the euro.
More can be done," she said, adding that low inflation allows for more aggressive steps to strengthen the euro.
Mario Draghi has said the ECB could intervene in bond markets and push down high borrowing rates that are threatening heavily indebted governments such as Spain and Italy with financial collapse. He has not said what the bank might do, though.
High bond market borrowing rates drove Greece, Ireland and Portugal to take bailout loans from the other euro countries in order to keep paying their debts.
Aside from monetary policy, Lagarde said that the euro zone still needs structural reform in order to bolster investor confidence in the euro. She called for more centralized supervision of the eurozone banking system and a unitary fiscal policy.
She said that the IMF would continue working with Greece to address its crisis. Leaders of a new fragile coalition government in Athens are currently in talks over further austerity measures needed for the debt-crippled country to remain in the international loan program that is protecting it from bankruptcy.
Debt monitors from the International Monetary Fund, European Central Bank and European Union - known as the troika - are now in Greece for an inspection, and are pressing the new government to make up for past delays in long-term structural reforms aimed at reducing the size of the public sector.
Asked if she would prefer the other members of the troika to take over the Greek loan program, Ms Lagarde said: "The IMF never leaves the negotiating table." She added that she would do everything she could to avoid losing IMF credibility in the process.
"We will be honest and demanding," she said.
