Mariano Rajoy, the Spanish prime minister, has called for the eurozone to have a "centralised control" authority, which would be in charge of the budgets of all the nation states.
Mr Rajoy has become the latest European politician to calling for countries to, in effect, abandon their sovereignty in a last ditch attempt to save the beleaguered currency
Mr Rajoy said a new central authority was the answer to the European debt crisis and would go a long way in alleviating Spain's woes as it would send a clear signal to investors that the single currency is an irreversible project.
Speaking at an event in Sitges, in the north-eastern province of Catalonia, he said: "The European Union needs to reinforce its architecture. This entails moving towards more integration, transferring more sovereignty, especially in the fiscal field.
"And this means a compromise to create a new European fiscal authority which would guide the fiscal policy in the euro zone, harmonise the fiscal policy of member states and enable a centralised control of (public) finances."
He also said the authority would be in charge of managing European debts and should be constituted by countries of the eurozone meeting strict conditions.
Mr Rajoy is not the first European leader to propose creating such an authority but the size of Spain – a country deemed too big to fail – may now accelerate talks.
Its set-up would require a change in the European Union treaties, a usually lengthy and politically painful process which requires ratification in the 27 member states of the bloc, including those such as the UK, which do not use the euro.
Germany, the de facto guarantor of the euro, has said further integration in Europe was required, including additional controls on national public finances. Angela Merkel, the German chancellor, said there should be no taboos when discussing these questions.
With the debt crisis now centred on Spain's teetering banking sector, talks are also under way on creating a banking union in Europe based on a centralised supervision, a European deposit scheme and a central fund that would cope with failed lenders.
Mr Rajoy backed the idea on Saturday and said that the government would say before the end of June how it will recapitalise Spain's troubled banking sector, which is currently being reviewed by independent auditors.
Overspending in the regions and troubles with a banking sector badly hit by a property crash four years ago have sent Spain's borrowing costs to record highs and pushed the country closer to seeking an international bail-out.
The risk premium investors demand to hold Spanish 10-year debt rather than German bonds rose to its highest since the launch of the euro – 548 basis points – on Friday.
The Spanish authorities, which have increased taxes, slashed spending, cut social benefits and bailed out troubled banks, argue that there is little else they can do and the European Union should now act to ease the country's liquidity concerns.
In private, senior Spanish officials have said this could be done by using European money to recapitalise directly ailing banks or though a direct intervention of the European Central Bank on the bond market.