French President Nicoals Sarkozy and German Chancellor Angela Merkel discuss ways to resolve the eurozone debt crisis.
NEW YORK (CNNMoney) -- The leaders of France and Germany said Monday that progress has been made on last month's proposed deal aimed at resolving Europe's debt crisis.
The fiscal pact, designed to ensure that governments do not spend beyond their means and rack up unsustainable debts, could be signed later this month and go into effect as early as March, said German Chancellor Angela Merkel, following a meeting with French President Nicolas Sarkozy in Berlin.
Sarkozy stressed that eurozone governments should stand by their commitments to reduce deficits, adding that the agreement could be signed in the "coming days."
The terms of the pact include, among other things, a balanced budget requirement with an "automatic correction mechanism," and a provision to make national budget policies subject to EU authority "ex ante," or before the fact.
The political leaders of the 17 eurozone nations, which share the embattled single euro currency, agreed in principle to abide by the pact following a summit on Dec. 9. But the agreement is still subject to parliamentary approval in some member states.
European Union leaders will meet Jan. 30 in Brussels for their first political summit of the year as they struggle to find solutions to the debt problems at the center of Europe's economic and financial crisis.
Merkel and Sarkozy, the leaders of the eurozone's largest economies, also reiterated their commitment to the euro currency and pledged to revive the continent's ailing economy.
"We believe in the Euro, we believe in Europe and must do everything to increase its competitiveness and foster job growth," said Merkel.
The leaders said that Greece, the nation at the heart of the crisis, should remain a member of the currency union. But they called on the government of Lucas Papademos to push through reforms necessary to secure the latest installment of bailout money for Greece.
Merkel and Sarkozy reiterated their support for an agreement with private sector banks and investors to "voluntarily" reduce the value of Greek government bonds by 50%, which has yet to be finalized. But they cautioned that the so-called haircuts will not be enough to solve the nation's economic and debt problems.
The leaders also discussed a proposed financial transaction tax, which France has championed as a way to overcome the crisis.
Sarkozy said the tax would never be implemented globally unless Europe and France take the first step. Critics say imposing a tax on financial transactions, such as trades of stocks or other assets, would drive capital away from European markets.