Greece has struggled to meet the fiscal targets set out by its international lenders [Reuters]

Germany wants Greece to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package, Al Jazeera has learnt.

The proposal would give European Union institutions operating in Greece power over the country’s fiscal policy.

Al Jazeera’s Andrew Simmons, reporting from Davos, said a source in the German government had confirmed the circulation of the proposal among EU countries, but that it was only one of several proposals.

“It’s only a proposal. There is no suggestion that there is a deal being made of it to be a condition of the next bail out for Greece,” he said.

“This is incredibly controversial because Greece will be put under EU control for its decision on tax and budget. It is really contentious right now.”

In Depth

 
QA: Eurozone debt crisis
 
Map: Eurozone members
 
Profile: George Papandreou
 
Timeline: Greek debt crisis

Earlier, UK’s Financial Times newspaper said it had obtained a copy of the proposal showing Germany wanted a new eurozone “budget commissioner” to have the power to veto budget decisions taken by the Greek government if they were not in line with targets set by international lenders.

“Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time,” the document said.

Under the German plan, Greece would only be allowed to carry out normal state spending after servicing its debt, the Financial Times said.

“If a future [bail-out] tranche is not disbursed, Greece cannot threaten its lenders with a default, but will instead have to accept further cuts in primary expenditures as the only possible consequence of any non-disbursement,” the newspaper quoted the document as saying.

Germany’s proposal comes amid discussions to finalise a second $170bn rescue package for Greece, which has repeatedly failed to meet the fiscal targets set out for it by its international lenders.