France and Germany said on Tuesday that all countries that use the euro currency should have mandatory balanced budgets and better coordination of economic policy, The Associated Press reported.

French President Nicolas Sarkozy and German Chancellor Angela Merkel also pledged to harmonize their countries’ corporate taxes, in a move aimed at showing that the eurozone’s largest members are working together to protect the euro.

Both leaders, who presented their proposals after meeting on Tuesday, stressed that they are committed to defending the common currency.

Sarkozy told reporters that he and Merkel want a “true European economic government” that would consist of the heads of state and government of all eurozone nations.

Sarkozy suggested the new body would meet twice a year and be led initially by EU President Herman Van Rompuy for a two-and-a-half year term. After that it could be opened up to other heads of states and government.

AP noted that the move appeared to be taking a step toward the closer long-term economic integration that many analysts have said is inevitable to make the euro experiment survive.

“There has to be a stronger coordination of financial and economic policy”0 to protect the euro, Merkel was quoted as saying.

She stressed that the current economic crisis in Europe built up over several years by the actions of several member states and there is no solution to tackle the crisis within days now.

“We will regain the lost confidence,” she said. “That is why we go into a phase with a new quality of cooperation within the eurozone.”

Sarkozy and Merkel ruled out issuing common government debt in the form of eurobonds, despite demand by many investors for such a move, which would be bold but politically difficult.

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