French President Nicolas Sarkozy (R) looks at German Chancellor Angela Merkel as she leaves after their meeting in Paris
France and Germany want a new EU treaty by March with tougher budgetary rules to deal with the eurozone debt crisis, President Nicolas Sarkozy and Chancellor Angela Merkel said Monday.
The two leaders made the announcement after crunch talks in Paris at the start of a crucial week for the euro, teetering on the brink because of its indebted member states, ahead of a key EU summit in Brussels on Thursday, reports AFP.
"The goal that we have with the chancellor is for an agreement to have been negotiated and concluded between the 17 members of the eurozone in March, because we must move quickly," Sarkozy said, warning of a "forced march to re-establish confidence in the euro and the eurozone".
Sarkozy said the new treaty would be either for all 27 EU members or for the 17 members of the eurozone, with other nations signing on a voluntary basis.
The Franco-German proposal is to be detailed in a letter to EU president Herman Van Rompuy on Wednesday, the day before the EU summit convenes in Brussels.
The two leaders backed automatic sanctions against EU member states whose deficits go over three percent of gross domestic product.
They also called for a "reinforced and harmonised golden rule" on deficits, which could oblige some states to enshrine the commitment to balance their public finances in their constitution or legislation.
The European Court of Justice should be tasked with verifying that national budgets obey deficit rules, but it should not be able to declare budgets "null and void", Merkel said.
With debt contagion threatening to spread throughout the eurozone, Italy kicked off a critical week by presenting a draconian package of cuts, taxes and pension reforms to parliament as Europe tries to pick up the pace to keep the euro alive.
Prime Minister Mario Monti warned that Italy risks a Greek-style "collapse" if it is not adopted, as financial markets cheered the proposals.
Italy, the eurozone's third-biggest economy, is desperate to prove to its European neighbours that it should be part of the discussions on saving the eurozone -- rather than being seen as one of its biggest problems.
Ireland's Prime Minister Enda Kenny also Monday announced a 3.8 billion euro austerity budget, a day after warning citizens to brace for years of economic hardship during a historic television address.
The call in Paris for tighter discipline and the austerity measures in Rome saw Italy's long-term borrowing rate fall below the key 6.0 percent threshold for the first time since the end of October.
Experts consider borrowing rates above 6.0 percent to be unsustainable in the long term for countries with slow growth and low inflation.