The leaders of France and Germany said on Monday they would push for EU treaty change by March to introduce closer fiscal union and sanctions for countries flouting deficit limits in a bid to shore up confidence in the euro zone.

President Nicolas Sarkozy said after talks with his German counterpart Angela Merkel in Paris that he hoped their plan would win backing from all 27 EU members at a summit this week but otherwise the 17 states of the euro zone would press ahead with a separate treaty.

The proposal would oblige all countries in the single currency to write a golden rule to balance their budgets into their constitutions.

It would also bring forward the introduction of the euro zone's ESM bailout fund by a year to 2012, allow it to take decisions by a qualified majority and modify its statutes to make clear that a debt write-down for Greece was a one-off.

Sarkozy said the Franco-German blueprint would be sent to European Council President Herman Van Rompuy on Wednesday, in time for EU leaders to debate it at a two-day summit starting on Thursday evening, when it should become clear if there was support from all 27 member states to approve it.

We want to make sure that the imbalances which led to the situation in the euro zone today cannot happen again. Therefore we want a new treaty, to make clear to the peoples of Europe, members of Europe and members of the euro zone, that things cannot continue as they are, Sarkozy told a news conference, flanked by the German leader.

The aim that Madame Merkel and I have is that the entire accord should be negotiated and concluded between the 17 members in March, because we need to go fast, he said.

While the new rules will introduce automatic sanctions for countries which breach a deficit limit of 3 percent of gross domestic product, Berlin dropped its demands for the European Court of Justice to have the power to prosecute rule breakers.

The court will instead have the mandate to review whether balanced-budget rules which countries will have to write into their constitutions comply with the new or revised treaty.

The court will not have the right to cancel national budgets, Sarkozy said.

The two leaders reiterated their opposition to the introduction of common euro zone bonds, which Germany fears would simply encourage peripheral members of the bloc to dodge painful fiscal and economic reforms and continue overborrowing.

Germany, however, dropped its insistence on an explicit mention of a clause in new bonds issued in the bloc stipulating that private bondholders may have to share the cost of any future bailout of a euro zone country.

Greece was a one-off case, and the voluntary debt write-down is a one-off, Merkel said.

(Additional reporting by Geert De Clercq and Catherine Bremer)

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