France, Germany agree to cooperate on euro proposals

(BERLIN) - Germany and France agreed Thursday to cooperate on proposals to shore up European economic policy in the current crisis, Berlin said Thursday, on the eve of a key finance ministers' meeting.

During an "extensive" telephone conversation, Chancellor Angela Merkel and President Nicolas Sarkozy "agreed that France and Germany would coordinate closely" at Friday's meeting in Brussels with EU president Herman van Rompuy.

The two leaders also agreed on "joint preparation" for a meeting of EU heads of state on June 17 as well as the forthcoming meeting of the Group of 20 major economies at the end of June, Merkel's spokesman Ulrich Wilhelm said.

"President Sarkozy accepted the invitation of the chancellor to come to Berlin on June 7" to flesh out their common position, Wilhelm said in a statement that did not provide further details.

The statement came after a perceived spat between Paris and Berlin, when French Economy Minister Christine Lagarde rebutted in public an earlier statement by Merkel that the euro was "in danger" due to its ongoing debt crisis.

At an international conference on financial market regulation Thursday in Berlin, officials were at pains to smooth over differences, with Lagarde saluting the "very strong alliance" between the two close allies.

Germany is poised to present proposals at the Brussels meeting that would firm up the fiscal rules governing Europe -- the Stability and Growth Pact.

The pact states that countries may not run public deficits above three percent of gross domestic product (GDP) or have debts above 60 percent of GDP.

In theory, countries can be fined for transgressing these laws, but this has never happened in practice. Berlin wants to withhold EU funds from fiscal sinners and take away voting rights if a country is in breach of the pact.

Earlier Thursday, Sarkozy also took a step towards tighter budgetary controls, saying that France's constitution should be altered to require new governments to sign up to a timetable to balance their budgets.