Euro zone mulls 20 billion euro separate budget: paper

Greek and others European national flags flutter near an euro symbol outside the EU Parliament in Brussels August 30, 2011.

BERLIN (Reuters) - European diplomats discussing the possibility of a separate budget to improve monetary union in the euro zone are considering a sum of around 20 billion euros ($26 billion), according to the Financial Times Deutschland (FTD).

There is still no clear definition of what a single, central budget would entail, but Germany strongly supports the idea as a way of coordinating transfers among member states, and France is also in favor, which in terms of euro zone decision-making means it has substantial momentum.

In the early release of an article to be published on Monday, FTD said the sum under consideration amounted to about 0.2 percent of the common currency bloc's gross domestic product (GDP). It did not cite its sources.

"The budget for the whole European Union currently totals around 130 billion euros a year, which is just over 1 percent of EU economic growth," the paper wrote. "A euro zone budget of around 20 billion euros would mean extra costs of around 0.2 percent of euro zone GDP."

"Germany would be liable for just under 6 billion euros a year," the FTD added.

The single budget proposal was first sketched out by Herman Van Rompuy, the president of the European Council, in a paper circulated in September to stimulate debate about how Europe's monetary union should be strengthened.

In the paper, he said a "fully fledged fiscal union" among the 17 countries that share the euro could involve the creation of a single treasury office and "a central budget whose role and functions would need to be defined".

Those suggestions have since been refined into guidelines that will form the basis of discussion among EU leaders at the summit on October 18-19. The idea will also be explored among euro zone finance ministers at a meeting in Luxembourg on Monday.

($1 = 0.7657 euros)

(Reporting By Sarah Marsh; Editing by Will Waterman)