French president Francois Hollande and Chancellor Angela Merkel will look to settle their differences over EU banking supervision during a two-day summit in Brussels.
Paris wants to speed up moves to create a single European banking supervisor, but Berlin places greater emphasis on stricter fiscal discipline.
Hollande said: “There are proposals to strengthen budgetary union. We’ll discuss those later. For the moment, banking union is at the top of the agenda for this summit. That’s why Mrs Merkel and myself will discuss those next steps, but first we must complete the step of banking union.”
Germany wants the EU economics commissioner to be able to block national budgets that breach agreed limits on state spending.
But on arriving in the Belgian capital, Merkel downplayed any talk of key decisions being taken at this meeting, saying “that those would come at December’s summit.”
That early pessism is unlikely to play well with investors, who are keen to hear more details over how EU leaders will help the eurozone’s troubled economies.
There are question marks over whether the austerity measures being asked of the likes of Spain, Portugal and Greece are proving counter-productive and worsening their recessions.
Madrid is edging towards its first sovereign bailout, while Athens has agreed to deeper spending cuts in order to tap further rescue funds.
IMF Managing Director Christine Largarde said on Tuesday that the pace of any belt-tightening must depend on each country’s economic conditions.