The eight-page paper lays out a timetable for closer fiscal integration, a step chancellor Angela Merkel believes is crucial to winning back the confidence of financial markets after more than two years of crisis.
The paper, which officials said was approved by chancellery, finance ministry, and foreign ministry last Friday, says the European Commission and European Council president Herman Van Rompuy are likely to come up with concrete proposals on closer policy co-ordination in time for a December summit of EU leaders.
“On this basis, the European Council could sign off on the plans at its spring 2013 summit,” the paper reads.
Meanwhile, pressure increased for the new EU bailout fund, the ESM, to inject funds directly into banks after strong support from French finance minister Pierre Moscovici and the EU’s economy commissioner, Olli Rehn.
Mr Rehn said that the link between sovereigns and the banks must be broken while the French minister supported that the ESM directly funding banks.
The pressure on Spanish borrowing costs eased as the market responded to a possible change of the ESM rules as Madrid resisted the idea of seeking a bailout mainly because of concerns over the nationalised Bankia.
Irish authorities are watching with interest as whatever solution is found could also be used to help lower Irish debt, which the commission believes could become unsustainable.
Germany is equally adamant that it will not support changes to the ESM and Ms Merkel’s spokesperson said if Spain needed aid, it could apply for a bailout.