The European Union must keep a "particularly watchful eye" on member states with high budget deficits and toughen penalties for those who bend fiscal rules, German deputy finance minister Joerg Asmussen said today.
"Budget consolidation is not just a matter for Germany, we expect to see similar efforts from our partners in the euro area," Mr Asmussen said in a speech in Berlin.
He added the EU needed to toughen punishments for bending the rules on running up big deficits.
Mr Asmussen was speaking ahead of a meeting between German politicians European Central Bank president Jean-Claude Trichet and International Monetary Fund managing director Dominique Strauss-Kahn in Berlin about Greece later today.
Officials from the IMF, ECB and the EU executive have been negotiating a three-year fiscal programme with Athens as a condition to release emergency loans to debt-stricken Greece.
Germany has pressured the Greek government to slash its massive budget deficit amid fears that Greece's debt problems could undermine confidence in the euro currency.
Mr Asmussen made no specific mention of Greece in his speech.
Though German fiscal policy would remain "expansive" in 2010, the government was working hard to draft an exit strategy from the support measures put in place to help steer Europe's largest economy out of its worst post-war slump, he said.
He said financial markets needed to become more transparent and urged the Group of 20 leading economies to press ahead with efforts to reform the sector.
"From our point of view, it's very important that we take steps to include non-banks in the regulatory framework, that includes hedge funds," he added.
Mr Asmussen noted that Germany was working on plans that would enable troubled banks to be wound down safely in future. "We must make it possible to wind down banks in a way that minimises risks to the system as a whole," he said.
Turning to the outlook for growth, Mr Asmussen said he expected the German economy would recover over the course of 2010 after making a "relatively slow start" to the year. Exports were likely to remain on an "upwards trend" this year, he added.