The German Chancellor, Ms Angela Merkel, and the French President, Mr Nicolas Sarkozy, have rejected calls for introducing a common government bond for all 17 euro zone nations and unveiled a set of proposals, including joint economic governance, to resolve the grouping’s debt crisis.

The two leaders, who held an emergency meeting in Paris on Tuesday on the debt crisis — which is threatening to spread to Italy and Spain — also called for enforcing strict budgetary discipline by incorporating a “debt brake” in member nations’ Constitutions by the middle of next year.

In addition, they suggested imposing a financial transaction tax to curb speculative trade, which could endanger the stability of debt-laden member nations.

The meeting was hurriedly convened in the wake of severe turbulence in the financial markets last week and speculation that France may be downgraded from its top-level AAA credit rating by ratings agencies.

Ms Merkel and Mr Sarkozy said the proposed joint economic governance is intended to closely coordinate the financial and economic policies of the 17 nations under the leadership of their heads of state and government, who will meet every six months.

The European Council President, Mr Herman van Rompuy, will chair those meetings.

Germany and France, the euro zone’s two largest economies, are determined to defend the euro and carry out their special responsibility, Mr Sarkozy told a joint news conference with Ms Merkel after their two-hour meeting in the Elysee Palace.

Chancellor Merkel said their decisions marked the beginning of a new phase of cooperation for the euro zone.

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