The joint press conference held yesterday by German and French premiers Angela Merkel and Nikolas Sarkozy contained proposals that were inevitable – closer economic and fiscal policy in the eurozone.

The two leaders called for “true economic governance” within the eurozone. Merkel seems adamant about the implementation of the plan, and said it would be a “step-by-step” integration. To start with, both called for bi-annual meetings of the heads of Eurozone states, to be chaired by European Council President Herman Van Rompuy.

But still, this was not enough for the markets, which were expecting a commitment to Italy’s proposal for jointly-guaranteed Eurobonds.

But this all points in the direction of the stance this newspaper has adopted for the past two years and more: the eurozone in its present form shows how difficult it is for countries to share a currency if they don’t have integrated government finances.

The proposals set out would be the first small step along the road towards integrated finances, however, it is not clear just what powers they have in mind for it.

President Sarkozy and Chancellor Merkel also called for new laws by next year in all euro countries requiring balanced government budgets. So far, the austerity programmes of Greece, Ireland, Portugal, Spain and others have been blocked by strikes and protests, while others have simply been lacasdaisical in their implementation – after all, the euro cannot fail and there is always a bailout on the table.

And this is the culture change that this integration should bring about. National governments would no longer be able to ‘do as they please’. The whole plan would eventually culminate in the setting up of a Eurozone Finance Ministry which would be able to exert the clout needed to bring fiscal deviants in line. While the idea is still in its infancy, it is bound to gather momentum especially if it is pushed forward by the two largest eurozone economies – France and Germany.

The markets, however, are still not appeased. Many are still calling for the introduction of ‘eurobonds’ which would be guaranteed jointly by each member state. The idea was put forward by Italy’s Finance Minister Giulio Tremonti, in a bid to stop the market panic which is driving up borrowing costs for Italy and Spain, hitting unsustainable levels.

The French and German leaders also suggested more taxation on financial transactions, but this is not the solution. The real solution is economic growth, but when one looks at the recent sharp drop in Germany’s figures, one can only worry.