Calling it a "veritable euro zone economic governance," French President Nicolas Sarkozy said the body will meet twice a year, and more if necessary.

"We want to state our absolute will to defend the euro," said Mr. Sarkozy after a meeting in Paris with German chancellor Angela Merkel.

The Franco-German tandem, who represent the euro zone's two largest economies, will propose in September the adoption of a tax on financial transactions, and will also push for all of the 17 euro zone members to adopt an obligation to balance their public finance