The two leaders said last evening after a meeting in Berlin that they are fully aware of their responsibilities for stability of the euro and they are determined to do "everything necessary" to increase the capital structure of the region`s banks.
"Ensuring a reasonable supply of credits is a basic condition for a good economic development," Merkel said.
The two countries shared similar views on increasing the capital structure of banks and the two nations have reached an agreement on the question of recapitalisation, she told a joint news conference with Sarkozy.
In this regard, they said they want the same criteria to be applied to all financial institutions.
Details will be disclosed at the end of this month when they have worked out a comprehensive package of proposals, Merkel said.
Sarkozy said that a durable solution to the debt crisis must be found before the end of this month.
Europe must solve its problems before the G-20 summit, which he will be hosting in the French resort of Cannes early next month, he said.
The economy can prosper only when the banks are stable, Sarkozy said.
The two leaders also reaffirmed their support for heavily-indebted Greece to remain in the euro zone