ALLIANCES: French President Francois Hollande, left, takes his seat next to German Chancellor Angela Merkel in Chicago yesterday. Picture: REUTERS

FRANCE's President Francois Hollande will push for eurobonds at tomorrow's European Union (EU) summit in Brussels, but a German official said the bonds "are the wrong thing at the wrong time".

Chancellor Angela Merkel is under pressure to make concessions even as Germany increasingly bears the burden of rescuing Europe.

Senior EU and US officials said the new French president raised the idea of bonds jointly underwritten by all euro-zone member states during Group of Eight talks at the weekend, and would again raise it when EU leaders meet in Brussels tomorrow.

He is expected to have firm backing from Italian Prime Minister Mario Monti, Spanish Prime Minister Mariano Rajoy and the European Commission, which has long been a backer of eurobonds.

Germany opposes any early move, saying much more progress is needed on co-ordinating fiscal policies across the euro zone first.

Ms Merkel wants Mr Hollande to sign up to the austerity-orientated fiscal compact before other options are settled on, including a new timeline for Greece's debt repayment. It has the backing of the Netherlands, Finland and others.

The rapid deterioration in the euro zone debt crisis over the past month, with Greece's potential exit from the 17-country currency bloc no longer taboo, has brought the idea of eurobonds back to the forefront.

"The eurobonds debate is back front and centre, and Mr Hollande will have support from other leaders if he raises it," one EU official said.

In a letter to EU leaders, European Council president Herman van Rompuy urged them not to have any "taboos" at tomorrow's summit, which was intended to focus on specific steps to stimulate growth and create jobs across the bloc.

"It is not too early to think ahead and to reflect on possible more fundamental changes," he wrote. "In many ways, the perspective of moving towards a more integrated system would increase confidence in the euro and the European economy."

Growth proposals are expected to include boosting the capital commitments of the European Investment Bank, and plans for "project bonds" underwritten by the EU budget to finance infrastructure.

The aim is to agree ideas that can be formally signed off at the next summit of EU leaders on June 28-29.

No definitive plans on Greece are expected until after that country's election on June 17, but markets may determine the pace of action.

The question remains whether the EU is strong enough to withstand Greece leaving the euro, or how far the bloc will go to contain the crisis as risk concerns move beyond Greece to Spain. Slovak Prime Minister Robert Fico told parliamentarians yesterday he would support France's position.

The victory of Mr Hollande's socialist party in France has shifted the euro-zone crisis debate towards growth and given renewed impetus to ideas that Ms Merkel has pushed aside in the past, including debt mutualisation.

Reuters