Germany and France said they will make proposals to amend European treaties in coming days to impose greater fiscal discipline on euro-area countries as they struggle to win back investor confidence.

The initiative announced today at a meeting in Strasbourg, France, involving German Chancellor Angela Merkel, French President Nicolas Sarkozy and Italian Prime Minister Mario Monti underscored their failure the past two years to stamp out the financial crisis. Just yesterday, concerns the euro was at risk undermined a bond auction in Germany, the biggest euro economy and until now an investor haven.

The planned treaty changes prepared for a Dec. 9 European summit involve "the question of a fiscal union, that is a deepened political cooperation," Merkel told reporters after the meeting over lunch. "It's not about a quid pro quo. It's about overcoming the defects in the euro zone's construction, step by step."

Merkel won backing on demanding changes to treaties as a prerequisite to discussing the issuance of common euro bonds. She also persuaded Sarkozy to refrain from demanding that the European Central Bank play a more active role.

"The fiscal union requires rules, it requires mechanisms for the credible implementation of those rules," Monti said at their joint press conference. "Within this context the stability bonds, as the European Commission called them, may provide a relevant contribution. Everything is possible within a sound fiscal union."

David Fuller's view Since European leaders have made it clear that they wish to preserve the euro, this is another essential step on the road to fiscal union.