Germany opposes EU's proposed

Germany is opposed to a pan-European bank deposit guarantee proposed by the European Commission as a step toward closer financial integration of the euro zone, German government sources said on Wednesday.

The European Deposit Insurance Scheme is one of several reforms proposed in a report published on Monday by the Commission in cooperation with other EU bodies.

Under the Commission plan, the deposit insurance scheme would be privately funded through risk-based fees paid by participating banks in the member countries and would complement existing national bank guarantee schemes.

"From the German viewpoint, what cannot or should not be an item for deliberation in the first phase is the question of a European deposit guarantee scheme," a government source said.

German Chancellor Angela Merkel has long been very wary on the issue of pooling fiscal resources in the euro zone to help countries in difficulty, fearing it would expose German taxpayers to greater financial risks.

Some countries argue that such sharing of risks is essential to make the euro zone sustainable over the longer term.

The Commission report also includes longer-term ideas such as a common euro zone treasury.

National leaders, who commissioned the report last year, will have a first chance to discuss it at a summit on Thursday and Friday that is likely to be dominated by efforts to prevent Greece defaulting on debt and potentially leaving the euro zone.