Jose Barroso, head of the European Commission, called on EU leaders to boost the firepower of the EU's €440bn (£366bn) bail-out fund and beef up its role, allowing it to intervene with pre-emptive bond purchases to help states under threat.
"It is important for the markets to know that Eurozone leaders are committed to do whatever is necessary," he said, hoping for action as soon as early February.
He also proposed a "new phase of European integration" with far-reaching oversight of the budgets, pensions, labour markets, and trade flows of EU states to prevent a recurrence of the imbalances that led to the EMU debt crisis.
Mr Barroso said the fund boost was a "precautionary" move, not directed at any one country. The gambit is risky since it may be taken by investors as a sign that Brussels fears imminent contagion to Spain, deemed too big for the current fund.
The response in Paris and Berlin was chilly. "We think the fund is big enough," said Francois Baroin, France's budget minister. German Chancellor Angela Merkel said the bail-out mechanism was "nowhere near exhaustion", adding curtly that she did not wish to debate the matter "any further".
Mrs Merkel is wary of attempts by Brussels to bounce her country into an EU debt union, or 'Transferunion' as it is described luridly by Germany's press. Such moves may breach the German constitution.
The dispute overshadowed a well-covered auction of €1.25bn of Portuguese debt, including 10-year bonds at 6.72pc, back below the 7pc danger line. The sale set off a surge in bank stocks in Lisbon, and was greeted with relief across the EMU perihpery. Spain's Ibex index jumped 5.3pc.
"The auction was a success from all angles," said Portugal's premier, Jose Socrates. "We do not need help: we can solve our own problems."
Gaven Nolan from Markit said purchases of Portuguese debt by the European Central Bank over the last two days had created good mood music but he doubted whether the bond sale would quell talk of a bailout.
"It didn't in the case of Ireland – which was fully funded for months ahead at the time of its bailout – and is unlikely to do so in the case of Portugal. The auction might have bought Portugal some time: it won't divert attention away from low growth prospects," he said.
The interest costs remain crippling for an economy facing contraction of 1.3pc next year, and scant recovery in 2012. The debt trajectory is precarious. The budget deficit will beat the target of 7.3pc of GDP in 2011, but only by use of pension transfers from Portugal Telecom.
Mark Ostwald from Monument Securities said confusion over the EU bail-out fund is a reminder of EMU's political limits. "We have gone nowhere since the show of unity in December. 'Mr Market' is still saying to EU leaders that they must come up with a mechanism to transfer money from the rich core to the periphery. We are no closer to that," he said.
Charles Dumas at Lombard Street Research said Germany faces an impossible demand. "If the German people go along with plans to prop up the economies of Club Med to save the euro, it means that they will have to pay subsidies for the next decade or two that significantly exceed what they have had to pay for German reunification," he said.
Separately, EU officials have floated proposals for a bank tax to fund the EU's permanent bail-out fund from 2013 onwards. An EU source said member states are "very cautious" about such an intrusion into fiscal sovereignty.
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