Euro zone mulls 20-bln euro separate budget -paper

BERLIN, Oct 7 (Reuters) - European diplomats discussing thepossibility of a separate budget to improve monetary union inthe euro zone are considering a sum of around 20 billion euros($26 billion), according to the Financial Times Deutschland(FTD).

There is still no clear definition of what a single, centralbudget would entail, but Germany strongly supports the idea as away of coordinating transfers among member states, and France isalso in favour, which in terms of euro zone decision-makingmeans it has substantial momentum.

In the early release of an article to be published onMonday, FTD said the sum under consideration amounted to about0.2 percent of the common currency bloc's gross domestic product(GDP). It did not cite its sources.

"The budget for the whole European Union currently totalsaround 130 billion euros a year, which is just over 1 percent ofEU economic growth," the paper wrote. "A euro zone budget ofaround 20 billion euros would mean extra costs of around 0.2percent of euro zone GDP."

"Germany would be liable for just under 6 billion euros ayear," the FTD added.

The single budget proposal was first sketched out by HermanVan Rompuy, the president of the European Council, in a papercirculated in September to stimulate debate about how Europe'smonetary union should be strengthened.

In the paper, he said a "fully fledged fiscal union" amongthe 17 countries that share the euro could involve the creationof a single treasury office and "a central budget whose role andfunctions would need to be defined".

Those suggestions have since been refined into guidelinesthat will form the basis of discussion among EU leaders at thesummit on Oct. 18-19. The idea will also be explored among eurozone finance ministers at a meeting in Luxembourg on Monday.

($1 = 0.7657 euros)

(Reporting By Sarah Marsh; Editing by Will Waterman)

((sarah.marsh@thomsonreuters.com)(+ 49 30 2888 5226))