German Chancellor Angela Merkel clashed with France's Francois Hollande over the creation of a budget czar who has the power to veto European Union members budgets.
Merkel said the economics commissioner should be given the right intervene if member states budgets violate EU deficit rules, reports the BBC.
She said the move would keep European countries from overspending again in the future.
Merkel endorsed the proposal hours before leaders meet in Brussels Thursday for a summit to focus on plans for a banking union.
The idea was originally floated by German Finance Minister Wolfgang Schaeuble and Merkel endorsed the proposal to Germany's parliament.
She acknowledged, however, that giving Brussels the power to intervene in budgets was not popular with many EU member states, reports AP.
Despite the resistance, she said her government will "continue to push for it."
"I am astonished that, no sooner does someone make a progressive proposal ... the cry immediately comes that this won't work, Germany is isolated, we can't do it," she said.
"This is not how we build a credible Europe."
Hollande expressed resistance to Merkel's suggestion at a gathering of Socialist leaders Thursday. He told reporters that the topic will not come up at the summit that is supposed to focus on prospects for a continent-wide bank supervision system.
"The topic of this summit is not the fiscal union but the banking union, so the only decision that will be taken is to set up a banking union by the end of the year and especially the banking supervision," Hollande told Reuters.
Reuters reports that Merkel and Hollande are expected to hold a private meeting before the start of the summit that could air some of their differences.
Merkel also threw cold water on the prospect of the Europe-wide banking system being in place by January, something many EU members have been pushing for, reports the Washington Post.
She insisted that “quality must come before speed” and that the timeline is unrealistic.
“There are a lot of very complicated legal questions, and I am not making the issue more difficult than it actually is,” Merkel said.