With the European economy facing its biggest challenge since World War II, Macron also acknowledged that the EU had fallen short in its initial response to the virus and needed to coordinate more closely on health.
Financed by "borrowing from the market in the name of the EU," the money will flow to the "worst-hit sectors and regions" in the 27-member bloc, the two countries said in a joint statement.
"We are convinced that it is not only fair but also necessary to now make available the funds... that we will then gradually repay through several future European budgets," Merkel said.
Countries benefiting from the financing would not have to repay the money, Macron added, emphasising that the funds "were not loans."
The borrowing marks a major shift by Germany, which has until now rebuffed calls by Spain and Italy for so-called "coronabonds" for joint borrowing on financial markets to provide stimulus cash.
Germany, the Netherlands and other rich countries had seen them as an attempt by the indebted south to unfairly take advantage of the north's fiscal discipline. But Merkel said the seriousness of the crisis meant that "solidarity" must be the order of the day.
"The aim is to ensure that Europe comes out of the crisis more cohesive and with more solidarity," she said, calling the proposal "courageous."
European Commission chief Ursula von der Leyen, who would have to help implement the package, hailed the plan as a "constructive proposal."
"It acknowledges the scope and the size of the economic challenge that Europe faces," she said. European sources told AFP last week the Commission would lay out its plan toward the end of May, hoping both to reconcile the opposing objectives while proving that European solidarity is more than just a lofty slogan.