The European Commission wants to cut funds to countries that run up high debts, including farm subsidies.
The commission's president, Jose Manuel Barroso, says without sanctions Europe's response to the financial crisis won't be credible.
Mr Barroso has made it clear that countries which fail to meet strict budget rules should be punished, by having their access to EU subsidies cut.
The threat of funding cuts could provide a strong incentive to countries like Greece and Spain, whose farmers recieve billions of dollars in subsidies.
It could also increase pressure on France, the biggest recipient of EU farm aid, to take more convincing measures to balance its budget.
