Paris: France's Nicolas Sarkozy and Germany's Angela Merkel vowed to give the eurozone bloc a "true economic government" but experts said their pledges were not enough to defuse the debt crisis.

Speaking after talks in Paris on Tuesday, Europe's power couple said they would propose an EU-wide tax on financial transactions and seek to create a eurozone governing body headed by European Union president Herman van Rompuy.

"We're heading towards a strengthened economic integration of the eurozone," Sarkozy said after just over two hours of talks with Merkel.

But the pair disappointed many by not backing the idea of issuing "eurobonds" to pool the debts of the 17 eurozone members and by insisting the bloc's existing 440-billion-euro (USD634 billion) bail-out fund is "sufficient".

Instead, the leaders said member states would be held to a tougher fiscal standard and new cross-border controls put in place.

Sarkozy told reporters at the Elysee Palace that all eurozone members should adopt laws by the middle of next year committing their governments to balanced budgets, on the model of Germany's widely admired constitution.

The summit had been keenly awaited by Europe's jittery financial markets, which dipped sharply during the day on reports that it would not produce much of substance.

In a signal of how markets might react, US stocks fell after the summit, snapping a three-session winning streak.

European Commission President Jose Manuel Barroso hailed the agreement, saying the plans "represent an important political contribution by the leaders of the two largest euro area economies."