Under the plans, which are set to be officially unveiled by European Commission president Jose Manuel Barroso later this week, millions of euros of fines could be levied on those nations which fail to reduce their deficit in a satisfactory manner.
Wolfgang Schauble, the German finance minister, has written to his counterparts in the EU recommending they back the proposal, as well as suggesting that countries which do not meet fiscal targets should have some of their voting rights and funding suspended, reports the Financial Times.
"The creation of stronger incentives to prevent and correct excessive government deficits stands at the very core of our endeavours to enforce fiscal and economic governance in the EU," he stated.
His letter follows a recent call from European Central Bank president Jean-Claude Trichet for temporary suspensions of EU voting rights to be considered for eurozone nations which fall foul of rules on the state of their public finances.
By Claire Archer