French President Francois Hollande pushed German leaders to use the European Union's permanent rescue fund to buy debt from countries such as Italy that have taken steps to revamp their economies.
"Italy has launched an idea that deserved to be looked at," Mr Hollande told reporters after a summit of Group of 20 leaders in Los Cabos, Mexico.
The proposal is for "virtuous countries like Italy", which have improved their public finances, to "be able to get funding for their debt" at better rates than countries that didn't make the same efforts.
"We're looking at the ways and means" to use the European Stability Mechanism, the 17-country euro region's bailout fund, "at these conditions", Mr Hollande said. Germany said that no specific plans for Europe's rescue funds to buy the bonds of euro-area governments were discussed.
G20 leaders held their second consecutive summit dominated by the euro region crisis as officials told Europe to pull together to overcome its debt crisis. With Spain readying a request within days for as much as €100bn for its banks, the euro region pledged to take "all necessary policy measures" to defend the currency union.
Mr Hollande expects to discuss the bond-buying proposal with his German, Spanish and Italian counterparts when they meet in Rome in June 22. There is no decision made yet on the proposal, he said.
Among the range of crisis-fighting tools open to them, the existing rescue facility and the permanent fund, due to come in force in July, can buy sovereign bonds in the secondary market.
European Commission spokesman Amadeu Altafaj said yesterday there is no indication of any country calling on the rescue fund to come to their aid.
Meanwhile, in Mexico City yesterday, British Prime Minister David Cameron admitted that he was frustrated by the slow pace of recovery in Britain.
But he said he is planning moves to take advantage of Britain's record low interest rates for state borrowing to put Government support behind mortgages, house-building and infrastructure projects.
Mr Cameron said he wanted to boost exports to the emerging economic giants, but would resist calls to go on a "borrowing and spending spree". (Bloomberg)