BRUSSELS (AFP) ― The EU will this week urge eurozone states caught in the debt crisis turmoil to club together to guarantee each other’s debts, vowing to police national budgets ruthlessly by way of a safeguard.

The European Commission will on Wednesday publish legislative proposals to implement common eurozone bonds that could start with a club-within-a-club and only partial debt-pooling.

That amounts to a direct challenge to the EU’s most powerful economy Germany to open the door to radical cross-border integration of public finances.

Berlin’s status as Europe’s safe pair of hands means it currently pays half the interest on its borrowings as number two eurozone economy France, and massively less than Italy or other big partners in trouble over their debts.

Without governance across borders to ensure similar good housekeeping elsewhere, Berlin has consistently opposed any move to put up a permanent umbrella for currency neighbors.

Michel Barnier, EU internal market commissioner, spoke out on Sunday in favor of eurobonds, but with some kind of common “governance” as a precondition to the bonds.

“The condition to these common eurobonds, to share debt ― which seems to me a fair idea ― is to have common coordination, surveillance and governance,”

he told French media.

For eurobonds to be effective, Europe’s budget ― which currently only represents a tiny one percent of European GDP ― would need to be increased, said Barnier.

Among a range of options, the Commission envisages an evolving system of “Stability Bonds” that could bring down yields for those under the most pressure “relatively quickly,” documents showed Sunday.

The proposals will be presented in tandem with plans to allow Brussels “technocrats” to intervene in the writing of national budgets.

They have been designed to combat nearly two years of eurozone turmoil after bailouts for Greece, Ireland and Portugal, and with even France now facing mounting pressure going into a presidential election year.

The vision outlined would see pan-eurozone bonds grow in scope and scale to reflect fiscal and economic convergence over the coming years ― and even dangles an option for only the best-run economies to gain entry to the system, and the worst to be expelled.

According to documents first published in Italy’s La Stampa and seen by the AFP, the European Commission will outline three options ― two of which would require a controversial change to the EU treaty, but one which could be started relatively quickly.

These would see either “joint and several,” or in the third instance, “several but not joint” guarantees being provided by governments in the event a debtor defaults.

In a clear nod to Germany and other Triple-A rated states which would find themselves paying higher rates ― France, the Netherlands, Finland, Austria and Luxembourg ― Brussels suggests a system of controls that would leave weaker eurozone economies on the outside looking in.

“In order to implement the vision of Stability Bonds as “stability bonds” one might also set fiscal conditions for member states in order to enter and remain in the system,” the document says.

Of the preferred first two options, number one would see full transfer of debt issuance to the common bond structure ― in other words, all German, Spanish and Estonian debt, for example, covered by each of the eurozone governments.

The second would see the partial pooling of debt issuance, a principle already backed by euro Commissioner Olli Rehn in an interview with Dow Jones Newsires last week.

This, for instance, could see debts above a 60 percent threshold of a state’s GDP ― the EU legal limit, widely ignored in recent years ― put into one basket and managed as a single repayment schedule, the Commission suggests.

It says even the decision to introduce any of these options could have an immediate effect on bond markets.

The executive says “joint and several” would bring down faster the yields for those paying the highest, but acknowledges that option number three, “several but not joint,” is a realistic starting point.

In order to get round concerns about “moral hazard,” meaning that one state might more readily run up debt knowing another can step in to dig it out of a hole, the Commission proposes “a mechanism to redistribute some of the funding advantages... between the higher- and lower-rated” governments.

A European Stability Mechanism set to supercede a eurozone bailout fund next year is suggested as the agent that would manage the system from issuance to repayment.