German chancellor Angela Merkel and newly-elected French president François Hollande are bracing for their first proper fight. The debate between austerity and growth is expected to narrow to the question of whether countries in the eurozone should jointly issue sovereign bonds when leaders meet in Brussels on Wednesday.

Hollande, a socialist who became president this month, supports the creation of eurobonds. So did his predecessor, the conservative Nicolas Sarkozy, but he was willing to drop the issue to allow France and Germany to combat the continent’s debt crisis together.

There was no such Franco-German unity on display in Camp David this weekend where leaders of the G8 countries met to discuss the global economic crisis.

American president Barack Obama embraced Hollande’s push for “growth” — which, to them, means more stimulus spending. He and other leaders paid lip service to fiscal consolidation but appear to have grown weary of austerity. Merkel insists that industrialized nations must get their fiscal houses in order to restore consumer and investor confidence.

British prime minister David Cameron, otherwise considered a champion of austerity, unexpectedly backed the creation of eurobonds before the G8 summit. The United Kingdom, outside of the eurozone, wouldn’t have to participate. Italy’s Mario Monti also supports the idea. It left Merkel without allies at Camp David.

The European Commission floated the notion of creating eurobonds last year as a way to stem Europe’s spiraling debt crisis. Joonatan Jakobs explained at the time how eurobonds would work at the Atlantic Sentinel.

Since most countries in the single currency area are economically stable, a eurobond would enable the least competitive among them to receive funding from the markets, substantially lowering the costs for countries that are currently in trouble.

Hence the German apprehension. Berlin fears that the creation of eurobonds will ultimately lead to a “transfer union,” the permanent bailing out of weaker states in the single-currency union at its expensive if they’re able to free ride on Germany’s pristine creditworthiness.

Spain endorses the proposal. Slovakia has come around to it. The previous conservative government was skeptical but left-wing prime minister Robert Fico, who assumed office in April, told parliament on Monday that he would back the French position.

Finland and the Netherlands remain opposed. With Germany, they argue that more progress is needed on coordinating fiscal policies across the eurozone before members can consider jointly issuing sovereign bonds.