The leaders of Germany and France have agreed on the need for a new EU treaty to set out mechanisms for controlling budgets of eurozone members.
After talks in Paris, Angela Merkel and Nicolas Sarkozy said they wanted a new treaty by March which would include automatic punishments for governments that overspend.
Financial markets rose and borrowing costs for Eurozone countries fell after the two leaders made their announcement.
The plans for a treaty will be discussed by other leaders at an EU summit in Brussels later this week.
Jacky Rowland reports from Paris.