Germany and France today scotched the idea of a joint euro zone bond issue, but Bundesbank president Axel Weber held out the possibility of targeted aid for euro zone countries which hit major trouble.
Speculation has grown for the past week that Germany and other European countries may club together in issuing a joint bond to help euro zone states like Ireland and Greece.
Mr Weber, who is also a member of the European Central Bank's Governing Council, said he opposed the idea.
"A euro bond would be exactly the wrong road. Common liability for national state finances is not desirable and would not be in agreement with the constitutional framework of the EU - the so-called 'no bailout clause'," he said.
"It must be clear that individual nations take responsibility for their fiscal policy," he told Germany's Die Welt newspaper in an interview published today.
A French government source also said there was no plan underway to issue a euro zone bond. "We do not think that it is realistic," the source added.
Discussion about the possible issuance of a euro zone bond has swirled against the backdrop of a widening in euro area debt yield spreads - reflecting a divergence in the financial situation of nations in the 16-nation currency bloc.
Mr Weber said euro zone countries were not at risk of going bankrupt, adding that bond spreads were widening "but that does not mean that a crisis is looming over (some countries') ability to pay".
Asked if he could imagine the euro zone breaking up, he said: "No, I can't...The costs of an exit would be enormously high for the affected countries."
"In the storm of a financial crisis, it is better to be on a big ship rather than in a small boat."
Mr Weber said he could envisage some help for states in financial difficulty but that it would take place only in extraordinary circumstances and with strict conditions attached.
"Issuing a blank cheque would definitely be wrong," he said.
"If, in an escalation of the situation, targeted aid for individual member states were unavoidable in light of an extraordinary emergency situation, then this would have to be tied to strict demands and conditions," he told Die Welt.
Mr Weber's backing for aid for financially-troubled euro zone countries could prove crucial to winning domestic support in Germany for any such move, and also signals that the ECB may be ready to buy into the idea.
Germany, which has worked hard in recent years to bring its budget deficit close to zero, has reservations about potentially helping other euro zone countries that have not shown such fiscal discipline.
Ireland, one country whose finances have deteriorated sharply during the global crisis, has a forecast deficit of 9.5 per cent of gross domestic product (GDP) this year - over three times the European Union limit and the highest in the euro zone.
Asked again and specifically if the euro zone would help stricken countries, Weber said it would depend on "the concrete situation".
"It must be clear to any government and population asking for help that any possible aid must be linked to strict conditions. There must be a guarantee that this will be kept to, and that the country finds it way back on to the right path," he said.
"Their concrete form and conditions would then have the character of IMF aid."
He said different euro states face different problems but declined to comment on the situation in individual countries.
Another way Germany and other financially secure euro zone states could help weaker states might be to give the country in question a temporary loan with conditions attached on the fiscal policy the recipient nation should then pursue.
Reuters