Proposals announced tonight by the leaders France and Germany to create a collective economic "government" for the euro zone have been welcomed by Minister for Finance Michael Noonan.

French president Nicolas Sarkozy and German chancellor Angela Merkel met in Paris today for talks on shoring up investor confidence in the area following a dramatic market sell-off last week.

They later put forward the plan for a euro-area economic council to be headed by current European Union president Herman van Rompuy and called for further euro zone integration, including deficit limits and biannual summits but said joint euro bonds could only be a longer-term option.

Mr Noonan welcomed the proposals but warned that introducing debt limits would require a constitutional amendment which was a matter for the Government to consider.

"I will be directly feeding Ireland's views into the discussions on the proposals at Euro
Group and Ecofin meetings and with my other Finance minister colleagues," said Mr Noonan in a statement tonight.

He said Department of Finance had already undertaken detailed work on the preparation of the fiscal responsibility bill as well as establishing a Fiscal Advisory Council.

Mr Noonan also reiterated Ireland's commitment to reducing its deficit to 3 per cent by 2015.

Among other measures announced to strengthen the bloc's economic government was a twice-yearly meeting of leaders and the creation of a presidency with a two-and-a-half-year term to steer this forum.

Chancellor Merkel said the European debt crisis won't be resolved by a single "big bang" policy but that euro area leaders will work steadily to win back the confidence of markets. "The euro area is heading into a new phase," Ms Merkel told reporters today in Paris after meeting with Mr Sarkozy.

She said Germany and France have agreed to anchor so-called debt brakes in their countries' constitutions and want other euro region governments to do the same.

"Germany and France have agreed and propose to anchor such a debt rule in the constitutions" of other euro countries and signal that deficit-reduction does not depend on changing political majorities, she said.

The German leader added the countries would propose the introduction of a financial transaction tax in September.

Ms Merkel said jointly issued European bonds "won't help us now" and that European leaders must work "step by step" on policies they've already begun to formulate to resolve the European debt crisis. "The euro area is heading into a new phase," she said.

The chancellor said she is "not pessimistic as regards the outlook for growth" in Europe's biggest economy, adding: "I think we're on a good track."

"We want to express our absolute will to defend the euro and assume Germany and France's particular responsibilities in Europe and to have on all of these subjects a complete unity of views," Mr Sarkozy told a news conference at his Elysee Palace offices, where he was flanked by Ms Merkel.

"Germany and France feel absolutely obliged to strengthen the euro as our common currency and further develop it."

"And it is entirely clear that for this to happen, we need a stronger interplay of financial and economic policy in the euro zone," Ms Merkel added.

He said euro bonds might be "imaginable one day," but that there was not enough integration to justify their introduction now Euro bonds could be the final step of integration, Mr Sarkozy told reporters.

Euro bonds have been fiercely opposed by Germany, which is fearful such a step would push up German borrowing costs and reduce incentives for weaker euro zone states like Greece to reform their economies.

"What we are proposing here is the means with which we can solve the crisis right now and win back trust, step by step ... I do not think euro bonds will help us in this," Ms Merkel said.

Mr Sarkozy said he and Ms Merkel were also proposing that all 17 euro zone countries commit to balanced finances and write that goal into their constitutional law by summer 2012.

On the financial transaction tax, Mr Sarkozy said: "The French and German finance ministers will table a joint proposal at the EU level next September for a tax on financial transactions. This is a priority for us."

Financial markets were closely watching the two leaders' second bilateral meeting in just over three weeks for any signal of bold steps to restore confidence, and above all any signal they might commit to issuing pan-European government bonds, a move that could make debt more affordable for troubled economies.

Additional reporting: Bloomberg/Reuters