Germany and France have been demanding changes to the treaty, including new sanctions on member-nations violating the limits on budgetary deficit and debts set by the Growth and Stability Pact to prevent a repeat of Greek debt crisis.
German Chancellor Angela Merkel on Wednesday vowed to fight for making changes in the treaty to punish those nations endangering the stability of the euro, by exceeding the maximum budgetary deficit of 3 per cent of the GDP and debt level of 60 per cent of the GDP. These are the maximum limits allowed under the pact.
She wanted the treaty to be amended to include tough sanctions against rule-breakers, such as scrapping the voting rights and imposing fines. Merkel has also called for creating a permanent financial shield to protect euro zone nations in the future from liquidity crisis.
"The new crisis prevention mechanism must be legally unassailable and that will be possible only with an amendment of the European treaty," Merkel said in a policy statement before the Bundestag, the lower house of parliament.
She defended her demands for tightening rules of the Growth and Stability Pact and argued that the present protective shield for the euro area cannot be sustained for a longer period.
Moreover, it "sends a wrong signal to the financial markets and EU member nations and creates a dangerous trend of expectations" that debt-ridden nations would somehow be bailed out by their EU partners, she said.
A change of the Lisbon Treaty is vehemently opposed by smaller EU member nations such as Luxembourg, Belgium and the Czech Republic, which fear that it could lead to several years of negotiations as well long delays in ratification by national parliaments.
It took eight years for the EU to negotiate the Lisbon Treaty and as the last member nation, the Czech republic ratified the treaty at the end of 2009. A change to the treaty requires the approval of national parliaments in all 27 member nations.
In the wake of Greek debt crisis earlier this year, euro zone nations along with the IMF had established in a 750 billion-euro (nearly a USD 1 trillion) fund to prevent the turmoil from spreading to other heavily indebted member nations such as Spain, Portugal and Ireland.
Euro zone nations also rescued Greece from bankruptcy by extending a 110 billion-euro bailout package. Germany contributes the lion's share of the USD 750-billion fund as well as the bailout package for Greece.
Merkel would want to prevent similar crisis in the future by stripping the voting rights of euro zone nations repeatedly violating the stability criteria. She has also urged the EU to work out a debt rescheduling system in which private banks would write off a part of the debt, owed by financially troubled states.
"It is not necessary that always the taxpayers have to step in to rescue a state from bankruptcy, but first of all it should be the responsibility of private banks which in the past made big gains" from the troubles of some states, she said.
Merkel also defended last week's compromise with French President Nicolas Sarkozy, in which she gave up her demand for automatic sanctions on rule-breakers in return for French support for amending parts of the Lisbon Treaty.
"It is true that an agreement between Germany and France is not everything in Europe. But, it is also true that nothing will happen without an agreement between Germany and France. That applies also in this case," she said.