Fiscal transfers from Germany to other countries in the euro zone will be essential to resolving the euro zone debt crisis in the long term, Erik Britton, director at Fathom Consulting told CNBC.
"What needs to happen is the bitter pill needs to be swallowed. In particular Germany needs to accept the need for a fiscal transfer from itself to other countries in the euro area," Britton said.
He said the transfer would need to be large and continue for an indefinite period to be effective.
"[It needs] to have mechanisms in place to have such fiscal transfers indefinitely into the future. The magnitude of that transfer is large. We're talking about hundreds of billions, maybe 1 trillion euros.
"Unless and until we get to that story and there is some acceptance of that, I don't see a solution to this crisis in the long term," Britton added.
European leaders meet on Friday to thrash out the details of a solution to Europe's debt woes. German chancellor Angela Merkel and French President Nicolas Sarkozy held the first of their pre-summit meetings on Monday and submitted a letter to European Council President Herman Van Rompuy outlining the key issues on Wednesday. The Franco-German proposals include a treaty change for either the 17 euro zone nations or all 27 EU states leading to greater fiscal union and new tighter budget rules.
Britton argued the transfer of payments from Germany would not involve a blank check for profligate nations safe in the knowledge that Europe's paymaster would ride to the rescue.
"There is a price for fiscal transfers. It is not going to be like: 'Be as profligate as you like and I will bail you out'. The price is real, savage austerity now and fiscal discipline and agreements to fiscal discipline later," Britton said.
US treasury secretary Timothy Geitner, who is in Europe for talks with key European leaders meets with French president Nicolas Sarkozy Wednesday to discuss the ongoing debt crisis.
Stephen King, group chief economist, at HSBC, told CNBC.com that a fiscal transfer involving Germany alone would not be enough.
"The question is where does the money come from? I don't think the tax base of Germany would be big enough. That is why Europe went to China a few weeks ago asking for its help and people talk about the ECB being big enough," King said.
He added his skepticism about a fiscal union's ability to resolve the euro zones debt problems.
"The problem of focusing on fiscal policy is that it does not deal with the underlying imbalances in the euro zone. One would have doubts about any package that emerges at the weekend," King added.