Germany and France have agreed to "open a new chapter" in European Union relations, after Chancellor Angela Merkel and French President Emmanuel Macron met to finalize plans for sweeping reforms of the 19-member eurozone, including a new parallel budget.

Tuesday's talks at Meseberg castle outside Berlin have a lot riding on them: Merkel's political survival rests on her finding a European solution to prevent another influx of migrants to Germany, while both leaders have staked their reputation on further reworking the eurozone.

Read more: Merkel and Macron mold plans for EU reform

Watch video 00:45 Merkel on migratory flows

What the two leaders agreed

The EU will set up a single eurozone budget to boost investment and promote economic convergence among all 19 member states.

The new budget will be put in place by 2021, but details on how it will be financed still need to be worked out.

The current European Stability Mechanism (ESM), introduced in 2012 to deal with the eurozone crisis, will be turned into a European monetary fund, which can offer loans to struggling EU countries, and better insulate the single currency from future crises.

Merkel said that a move towards a banking union can only happen after individual banking risks have been reduced.

On migration, the two leaders said they would push for greater solidarity among EU states to ensure a European response to the refugee influx.

They both restated their belief that the migrant flow to Europe needs to be reduced.

Merkel spoke of the need to beef up staffing at the EU's border agency, Frontex.

The pair agreed to reduce the number of EU commissioners from the current 28.

Read more: German economists slam Macron's eurozone reform agenda

Watch video 00:42 Macron: 'The issue of migration affects the everyday life of our citizens'

Budget details to be hammered out

"We are working to make sure that the eurozone budget will be used to strengthen investment, also with the aim of strengthening convergence within the eurozone," Merkel said.

Macron added that the budget will be a "real budget with annual revenues and spending."

Regarding migration, Merkel said it was vital that EU states are "not just working for ourselves but in the spirit of Europe."

In reference to wider reforms to EU foreign policy and defense, Merkel said: "We want Europe to find its place in a multilateral world." The German chancellor said the EU needed to react more speedily to world events and "we won't always wait for absolute consensus."

Read more: Is Emmanuel Macron Europe's new Angela Merkel?

Watch video 03:22 Share EU needs Macron vision, but not his 'super-state' Send Facebook google+ Whatsapp Tumblr linkedin stumble Digg reddit Newsvine Permalink https://p.dw.com/p/2wNW3 EU needs Macron vision, but not his 'super-state'

Moment of truth: Tuesday's talks were seen as vital for ensuring the European project moves ahead after a decade of crisis, division and instability. France said ahead of the talks that if Merkel and Macron didn't agree on strengthening the eurozone and dealing with migration, the bloc was likely to return to turbulent times.

Read more: Macron's EU: Most Germans support reforms... to a point

Macron gets his way: Self-proclaimed europhile, Macron, who has vowed to reform the bloc, had previously been pushing for the creation of a parallel budget for the eurozone. But he may not achieve the several hundred billion euro allocation that he had hoped for.

Much-needed reforms: Although Europe's economy has picked up steam, and there is no immediate sign of financial stress, many analysts maintain that reforms are needed to protect the single currency.

What happens next?

The reforms will be discussed at a summit of EU leaders on June 28-29.

Each evening at 1830 UTC, DW's editors send out a selection of the day's hard news and quality feature journalism. You can sign up to receive it directly here.