German Chancellor Angela Merkel parried attempts to get her toaccept more flexible use of the euro-region's rescue funds andcollectively financing debt, while agreeing with leaders of Italy,Spain and France on a proposal to spur economic growth.

In a meeting in Rome, Merkel, Italian Prime Minister MarioMonti, French President Francois Hollande and Spanish PrimeMinister Mariano Rajoy said they would lobby their European Unionpartners to accept a growth plan worth as much as 130 billion euros($162 billion), or about 1 percent of the euro-region's economicoutput. They didn't give specifics about the plan or how it wouldbe financed.

European leaders are looking for a way out of their almostthree-year old debt crisis that has forced four countries to seekbailouts. Leaders are racing to come up with a plan by a summit onJune 28-29 to convince the investors that they can salvage theregion's monetary union.

“We want to make clear that we're going to do everything tofight for the euro, as our currency from which we all profit, andfor its future — as it has been a stable currency for the past 10years,” Merkel said. “For this we have to resolve a number ofproblems, some of which we've already done.”

In an interview today with a group of European newspapersincluding Le Monde and El Pais, Monti said the weeklong run up tothe summit may prove critical to the survival of the euro. Shouldleaders fail to produce a blueprint for a tighter fiscal andfinancial union, there will “be progressively greater speculativeattacks” on the currency bloc's “weaker” nations.

Monti Proposals

Prior to the meeting, Monti had put forth his own proposal for abanking union, including a European supervisor and a depositguarantee fund. He also pressed for nations to give up someautonomy over their budgets. He called for a mechanism to helpbring down surging borrowing costs for nations that are meetingtheir fiscal goal. Monti also favors euro-area countriescollectively selling debt.

There was little sign at today's four-way press conference thatMerkel backed the more flexible use of the existing bailoutmechanism.

Hollande, who backs the so-called euro bonds, signaled as muchwhen he said “euro bonds should be a plan, for in 10 years whenthere will be a union, an integration, euro bonds will be a usefulinstrument for Europe.”

The four leaders did agree for the need of afinancial-transaction tax, that could be used to fund future bankrescues, Merkel said.

Rajoy, who on June 9 said his government would request a much as100 billion euros in aid for its ailing banks, said he was pleasedwith the outcome because the leaders agreed to “put into place allthe mechanisms necessary to achieve financial stability in the EU.Rajoy didn't give any details.

Bloomberg News