Spain currently holds the rotating EU presidency and wants to push for a form of European "government" on economic issues to replace the EU's long-term growth strategy.
The new initiative would include both incentives to perform and "corrective measures" for failure, Spanish Prime Minister Jose Luis Rodriguez Zapatero said on Thursday.
But while German Economy Minister Rainer Brüderle said he welcomed the idea of EU members better coordinating their economic policies, he warned against creating "a new bureaucracy."
"I do not think the idea of imposing sanctions on member states for not fulfilling fixed targets is sensible," Brüderle said in a statement on Saturday. "Up to now, the Lisbon strategy has been based on a partnership approach without sanctions and we ought to continue that."
The Lisbon Agenda, as the old strategy was known, was supposed to make the EU the world's most competitive economy by 2010 but never achieved its aims as governments were under no obligation to conform.
Spain will launch the initiative at a summit in Brussels on February 11 which will focus on ways to revive sluggish growth.