ROME (Reuters) ? Italian Economy Minister Giulio Tremonti stepped up calls for a more coordinated response to the euro zone debt crisis on Saturday ahead of a potentially vital summit between the leaders of France and Germany next week.
Tremonti returned to proposals -- rejected in the past by Berlin and Paris -- for the creation of common euro zone bonds that would effectively make individual governments debt a common burden.
His British counterpart George Osborne, long a supporter from outside the euro zone of more fiscal integration within the currency bloc, went as far as to say that some form of outright fiscal union was now needed.
"A lot depends on the choices which may be made about Europe and for Europe in the coming days," Tremonti told a news conference at which he detailed some of the steps contained in a 45.5 billion euro austerity package unveiled late on Friday.
Rome has been at the center of the euro zone crisis over the past month, with the European Central Bank forced to buy Italian bonds to stem market panic and prevent borrowing costs in the euro zone's third largest economy spinning out of control.
The austerity package unveiled on Friday, which contained a painful mix of spending cuts and tax increases, was demanded by the ECB in exchange for a commitment to protect Italian bonds but Tremonti said the problem risked spreading unless Europe ended its piecemeal approach to the crisis.
"A greater degree of integration and consolidation of public finances in Europe is necessary," he said, as he made a fresh appeal for commonly issued euro zone bonds to calm fears about the credit-worthiness of the bloc as a whole.
"We would not have arrived where we are if we had had the euro bond," he said.
Tremonti's remarks come amid growing calls for a more decisive response to the crisis from euro zone leaders. German Chancellor Angela Merkel and French President Nicolas Sarkozy meet in Paris for talks on the crisis next Tuesday.
Tremonti said there were "strong expectations" of the meeting and added that signs were pointing to a more coordinated policy approach.
"We expect developments which we think could and should take us in a direction toward fiscal consolidation and integration in Europe, otherwise the complications will continue," he said.
Osborne said deeper integration had been the inevitable conclusion from the start of the single currency project.
Asked if the only answer for the euro zone was some kind of fiscal union, he told BBC radio: "The short answer is yes."
A new poll for the Bild am Sonntag newspaper on Saturday showed 31 percent of Germans believe the euro will be gone by 2021.
RESISTANCE
Italy has the second highest public debt burden in the euro zone at 120 percent of gross domestic product but had until recently stayed out of the crisis thanks to a relatively modest budget deficit and a generally conservative financial system.
However doubts about its chronically slack growth and its divided center-right government led to a sharp turnaround in market sentiment last month.
Although markets have not had time to react to the latest austerity package, the surge in bond yields which had driven Italy's borrowing costs to unsustainable levels has eased since the ECB began buying Italian bonds on Monday.
Both Germany, effectively the euro zone's paymaster, and France have opposed the idea of jointly issued bonds which would allow weaker and more indebted states to piggy back on more highly rated countries and issue debt more cheaply.
They say common debt issuance would remove a key driver of fiscal discipline in individual member states and push up their own borrowing costs as AAA-rated sovereigns.
But as the crisis has spread from smaller countries like Greece and Ireland to big economies like Italy, the prospect of an emergency that would overwhelm all existing bailout tools has also raised concerns about the impact in the rest of the world.
"An unstable euro is very bad news for us," Britain's Chancellor George Osborne told BBC radio on Saturday.
"We have to ensure that our influence on important decisions like financial services is not undermined. But we do yes have to allow greater fiscal union while protecting our own national interest," he said.
Greece, which last year became the first euro zone country to seek a bailout and which has been a strong supporter of the euro bond idea, also called for a euro bond.
"Risks could have been avoided if there had been political decisions to strengthen the temporary rescue mechanism, and even more if we had moved toward a Eurobond," government spokesman Ilias Mosialos told Sunday newspaper To Proto Thema in a pre-publication extract carried by the state-run Athens News Agency.
(Additional reporting by Avril Ormsby in London and Harry Papachristou in Athens; editing by Patrick Graham)
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