* France, Germany see need for EU treaty changes
* Want permanent crisis resolution mechanism
* Paris, Berlin want EU members' proposals by March
(Adds quotes, details)
By Jan Strupczewski and John Irish
LUXEMBOURG/DEAUVILLE, Oct 18 (Reuters) - France and Germany called on European Union member states on Monday to draw up proposals by next March for a permanent system to handle crises in the euro zone and said it would mean changing the EU treaty.
A joint statement issued by French President Nicolas Sarkozy and German Chancellor Angela Merkel at a summit in France said they also agreed that the private sector should be involved in the system, intended to resolve problems like the sovereign debt crisis that hit Greece this year.
They called for proposals to be submitted before an EU summit next March, signalling a desire to speed up the process. The executive European Commission has called for countries to come up with ideas in the latter part of 2011.
"We have to move forward because in 2013 the rescue funds for the euro will end, so we need a more lasting rescue mechanism," Merkel told a news conference in the northern French port of Deauville.
The two biggest countries in the euro zone agreed on the need for changes to EU law to make it possible to suspend the voting rights of an EU country which seriously violates the principles of the Economic and Monetary Union (EMU).
"Financial sanctions are limited. If there is a situation like Greece, is there any sense in imposing a fine? However, there is sense if you ban a state from voting on a raft of (key) EU decisions," a French source close to the talks said.
The euro zone has 16 members, to be joined by Estonia next year.
The necessary amendments to the EU treaty should be adopted and ratified by member states before 2013, the French/German statement said.
"We are conscious of the reluctance to amend the treaties as a whole," the French source said. "What we are proposing is a surgical revision. We don't want it to open a debate on the constitution or the union."
Changes to the EU treaty have to be ratified by all 27 EU member states, some of which have resisted such changes.
EU finance ministers, carrying out a general overhaul of the bloc's fiscal rulebook in Luxembourg, were discussing how far to commit themselves to creating a permanent mechanism for crisis resolution in the euro zone.
The changes to the budget rules, outlined in the Stability and Growth Pact, are the biggest overhaul of the fiscal rules underpinning the euro since its creation in 1999 and are meant to prevent another Greek-style sovereign debt crisis.
The euro zone has so far agreed on ad hoc solutions for emergency financing -- an 80 billion euro ($112 billion) bilateral loan package for Greece and a 500 billion euro European Financial Stability Mechanism for all euro zone states.
Both mechanisms expire in 2013.
According to a draft proposal prepared for EU finance ministers last week, a permanent crisis resolution mechanism would have to involve strong conditions for any aid to be given, with terms and conditions similar to those imposed by the International Monetary Fund.
It would also involve the private sector and the IMF, address the issue of moral hazard, strengthen incentives to pursue sound fiscal policy and respect the independence of the European Central Bank, the draft said.
"The mechanism is a problem due to the no-bailout clause," the French source said. "We (France and Germany) want it to be permanent on an uncontested judicial base... so the treaty must be changed," he said. (Editing by Timothy Heritage)