Any hopes the markets may have held early on Tuesday about efforts by Angela Merkel and Nicolas Sarkozy to renew a push to strengthen the euro had faded by the end of the French and German leaders’ meeting.

The euro fell from its highest level in three weeks after they spoke, falling 0.3 per cent to $1.44, on disappointment over the rejection of launching a jointly guaranteed eurozone bond.

Ms Merkel and Mr Sarkozy pledged support for the creation of a “real economic government” in the eurozone, which would involve at least two summits a year of eurozone leaders, chaired by Herman Van Rompuy, the president of the European Council – a move that has already been agreed by the 17 eurozone states. But the two leaders have yet to define what “economic government” really means.

They also called for all 17 members to insert a binding clause into their constitutions to set a ceiling on public borrowing, intended to make balanced budgets the norm, by mid-2012. The present proposal requires them to put such a commitment into national legislation, rather than necessarily in the constitution.

The only new element appeared to be agreement to co-ordinate their own budget planning, and seek to negotiate a common corporate tax base.

The dilemma for the two leaders was to reconcile differing priorities at their summit meeting. Mr Sarkozy wanted to present their conclusions as substantial and forward-looking, while the German chancellor was most concerned to avoid pressure for new initiatives. In particular she wanted to avoid any suggestion of the need to launch jointly guaranteed eurozone bonds to help the most debt-strapped members of the monetary union.

Germany is strongly opposed to the idea of guaranteeing borrowing for other eurozone states without much closer economic and fiscal harmonisation.

On that question, Ms Merkel won the endorsement of the French president that the moment was not right to introduce such bonds. “We have exactly the same position,” he said. “Eurobonds can be imagined one day, but at the end of the integration process, not the beginning.”

For his part, Mr Sarkozy won the chancellor’s enthusiastic endorsement of his plans for a constitutional debt ceiling, and for common corporate taxation, a long-standing priority for the president, who wants to reform France’s existing system.

Ms Merkel insisted that the main challenge must be for the eurozone governments to regain trust in the financial markets, and the top priority was to reduce their debts and budget deficits.

The purpose of the Franco-German proposals was to make national commitments to agreed stability and growth targets more binding, she said, and reinforce closer co-ordination between the countries sharing the euro as a common currency.

France and Germany also want to give the European Commission more power to interfere in national plans to use European Union structural funds, to ensure that the money is fully spent, devoted to boosting competitiveness and “focused on growth”, Ms Merkel said.

To demonstrate their own commitment to much closer co-ordination of economic and budgetary policies, the leaders will also require their finance ministers to agree on common economic forecasts before they draft their annual budgets.

Ms Merkel dismissed fears of a slowdown in German growth following the latest quarterly figures, stressing that the German economy had “reached the level we were at before the crisis”. But all European governments faced a constant task to raise growth rates and boost competitiveness, she added, while the Group of 20 countries were also rightly focused on raising global growth.

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