Sarkozy, Merkel propose tighter Euro-zone governance, debt limits

Laura Rozen
August 16, 2011

French President Nicolas Sarkozy and German Chancellor Angela Merkel, emerging from meetings in Paris today amid mounting concerns about debt-ridden Euro-zone economies, said they'll push for tougher debt rules and tighter integration and financial governance among the 17 countries that make up the Euro trading zone.

But the leaders of Europe's two largest economies rejected some other measures to bolster regional growth, including the issuing of common Euro-bonds or further expanding the current $630 billion fund to rescue faltering Euro-zone national economies.

"Euro bonds--we can imagine having them one day," Sarkozy said at a joint press conference following their two hour meeting, Bloomberg reported. "But it will be at the end of a process of integration, not the beginning."

The two European leaders proposed instead that "debt limits be written into national law" and that member nations form a "euro council" that would be part of a "planned 'economic government' for Europe," Bloomberg's Patrick Donahue and Mark Deen wrote.

"It's very obvious that in order for this to work we need a stronger convergence in finance and economic policy within the euro zone, and Germany and France are at the vanguard of that effort," Merkel said at the briefing.

The initiative "reflects a realization that disparate fiscal policies within the euro zone are sowing the seeds of its destruction," Reuters' Mike Peacock wrote in an analysis.

However, Peacock added, "despite fierce opposition from Germany,  many experts believe the only way to ensure affordable financing for the bloc's most financially distressed countries would be for the euro area to issue joint euro bonds."