French President Nicolas Sarkozy said he had agreed with German Chancellor Angela Merkel to take a decision by the end of March on whether to strengthen a European firewall to stem contagion from the euro zone debt crisis.

Sarkozy said the options on the table were whether to allow the euro zone's temporary EFSF rescue fund to expire and rely on the permanent ESM mechanism, to let them both work at the same time, or to fold the remaining funds from the EFSF into the ESM.

Madame Merkel and I agreed that we would take a decision at the end of this month on this subject, Sarkozy told a news conference in Brussels on the sidelines of an EU leaders summit.

Asked if there would be an emergency summit this month on the subject, Sarkozy said: There may be some initiatives from here to the end of March ... Not necessarily a summit.

(Reporting by Emmanuel Jarry; Writing by Daniel Flynn; Editing by Catherine Bremer)