WRAPUP 3-Germany, France vow tighter policy coordination
* Sarkozy, Merkel agree to align tax, labour policy
* Both reject Eurobond idea, increase in rescue fund
* Euro eases, spreads edge up in thin end-year trading
* ECB places ball in governments' court
(Adds Trichet comments and market reaction)
By Erik Kirschbaum and Emannuel Jarry
FREIBURG, Germany, Dec 10 (Reuters) - Germany and France pledged on Friday to better align their tax and labour policies to foster convergence in the euro zone, but rejected calls for an increase in the bloc's rescue fund and joint sovereign bonds.
Earlier on Friday, European central bankers had told euro zone governments they could not count on the ECB alone to solve a debt crisis which has forced bailouts of Greece and Ireland, and heaped pressure on countries like Portugal and Spain.
At a news conference in the southwestern city of Freiburg, Chancellor Angela Merkel and French President Nicolas Sarkozy presented a united front ahead of a crucial summit next week where EU leaders are expected to agree the terms of a permanent rescue mechanism for the bloc.
Berlin has opposed calls by Spain and other countries to move towards a full-fledged "fiscal union" in the 16-nation bloc but appeared on Friday to have agreed to a limited form of policy coordination, although little detail was offered.
"We have agreed to the convergence of German and French tax policies and I thank the German chancellor for this opening," said Sarkozy.
Merkel said it was up to Germany and France to set an example on questions of competitiveness, showing partners how far the bloc's biggest economies could cooperate in areas "beyond pure budget policy".
* Both reject Eurobond idea, increase in rescue fund
* Euro eases, spreads edge up in thin end-year trading
* ECB places ball in governments' court
(Adds Trichet comments and market reaction)
By Erik Kirschbaum and Emannuel Jarry
FREIBURG, Germany, Dec 10 (Reuters) - Germany and France pledged on Friday to better align their tax and labour policies to foster convergence in the euro zone, but rejected calls for an increase in the bloc's rescue fund and joint sovereign bonds.
Earlier on Friday, European central bankers had told euro zone governments they could not count on the ECB alone to solve a debt crisis which has forced bailouts of Greece and Ireland, and heaped pressure on countries like Portugal and Spain.
At a news conference in the southwestern city of Freiburg, Chancellor Angela Merkel and French President Nicolas Sarkozy presented a united front ahead of a crucial summit next week where EU leaders are expected to agree the terms of a permanent rescue mechanism for the bloc.
Berlin has opposed calls by Spain and other countries to move towards a full-fledged "fiscal union" in the 16-nation bloc but appeared on Friday to have agreed to a limited form of policy coordination, although little detail was offered.
"We have agreed to the convergence of German and French tax policies and I thank the German chancellor for this opening," said Sarkozy.
Merkel said it was up to Germany and France to set an example on questions of competitiveness, showing partners how far the bloc's biggest economies could cooperate in areas "beyond pure budget policy".
