Germany's main business lobbies on Sunday called on countries sharing the euro currency to adopt tough rules at an upcoming summit aimed at sorting out Europe's debt crisis.

In an open letter to euro zone leaders, the heads of the BDI, BDA, DIHK and ZDH industry associations urged countries to adopt German proposals aimed at strengthening fiscal discipline.

We thus support the government's proposals for solid budgets and competitive European economies, the leaders wrote. Collectivising debt -- as is being debated -- would on the contrary overburden strong states and weaken Europe.

Berlin, with Paris' backing, wants euro zone countries to agree to a competitiveness pact at the March 11 meeting in Brussels in exchange for boosting the scope and capacity of an emergency fund for bailing out countries cut off from the markets.

Financial markets are watching the drama closely, particularly Germany's reluctance to pour more money into the fund, and the surprise announcement last week that the ECB may raise interest rates this spring -- heightening anxiety about Europe's ability to contribute to the global recovery.

In comments released on Sunday, German Finance Minister Wolfgang Schaeuble said he hoped a basic agreement would be reached over the pact, sending another sign to financial markets that Europe was resolved to defend its currency.

The government's goal is for the basic decisions to be made clear on Friday, so that afterwards finance ministers can move to work out the details, he told the Stuttgarter Zeitung.

In their letter, the associations described the pact as a sensible extension of Europe's budgetary rules, and backed plans gaining support in Europe to adopt debt restraints nationally.

The incentive for solid fiscal policy must be strengthened through debt brakes in national constitutions. If a country breaks the stability and growth pact, sanctions must come automatically, it read.

The groups also voiced support for several initiatives sought by proponents of more hardline discipline, and opposed by some weaker states and those with national conflicts.

They want Europe's next bailout fund, which is to replace the current fund in 2013, to be activated only as a last resort when the stability of the whole bloc is in danger, and say it must include an orderly procedure for state insolvency.

The euro zone should not issue common bonds at this stage, and the European Central Bank should immediately stop propping up weaker states by buying their debt, they said.

(Editing by Jon Loades-Carter)

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