The leaders of Germany and France have agreed on the need for a new European Union treaty to set out mechanisms for controlling the budgets of eurozone members.
After talks in Paris, Angela Merkel and Nicolas Sarkozy, the leaders of the single currency bloc's largest economies, said they wanted a new treaty by March which would include automatic punishments for governments that overspend.
French President Sarkozy said that the new proposals would include a modified EU treaty, ideally for all 27 EU members, but that they were also ready to draw up a treaty for the 17 members of the eurozone single currency bloc, though this would be open to others.
The two leaders told a news conference that they would ensure "imbalances" that sparked the crisis in the eurozone were not repeated.
"We want to make sure that the imbalances which led to the situation in the eurozone today cannot happen again," Sarkozy said.
"Therefore we want a new treaty, to make clear to the peoples of Europe, members of Europe and members of the eurozone, that things cannot continue as they are."
German Chancellor Merkel wants eurozone states to surrender budgetary control to a European authority with veto power, which would require changing the EU treaty.
As announced, France had wanted governments to have control of imposing sanctions on member states who fail to observe budgetary rules.
Al Jazeera's Jacky Rowland, reporting from the French capital, said that for the first time, after months of uncertainty and apparent dithering and disagreements over how to respond, the two leaders spoke in greater detail about how they intended to tackle the crisis
"We're used to these meeting ending with vague statements, not specifics. Here we had a whole list," our correspondent said.
Details of the Merkel-Sarkozy plan would be put in a letter to be presented to the president of the European Union and to individual national leaders for approval, she said.
"I think, really, the key quote was from both ... Sarkozy and Merkel where they repeated what has happened must not happen again. Very specifically what happened in Greece must not be allowed to reproduce itself," she said.
Al Jazeera speaks to Clem Chambers, CEO of ADVFN, a European financial website, about the EU economy
The duo, increasingly dubbed "Merkozy" as they intensify bilateral efforts to restore confidence in the battered eurozone, had held discussions over lunch, their latest attempt to fix a crisis that is threatening trigger a global financial crisis.
Mario Draghi, the chief of the European Central Bank, signalled that a eurozone "fiscal compact" could nudge the bank to act more decisively to fight the crisis.
European markets responded positively to the announcement, with London's FTSE closing up 0.28 per cent, Germany's DAX gaining 0.42 per cent and Paris' CAC up 1.15 per cent.
But credit agency Standard & Poor's increased the pressure on European Union leaders to reach agreement on tackling eurozone debt by placing 15 eurozone states, including Germany and France, on "credt watch negative", meaning they could be downgraded.
Analysts cautioned that opposition in other eurozone states to a more intrusive and stringent fiscal regime could yet derail a rescue plan that has eluded eurozone leaders for two years.
Source: Al Jazeera and agencies