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Markets fall as Merkel-Sarkozy debt talks disappoint | Markets fall as Merkel-Sarkozy debt talks disappoint |
(40 minutes later) | |
European shares have fallen after talks between French and German leaders did little to calm investors' fears that the debt crisis could spread further. | European shares have fallen after talks between French and German leaders did little to calm investors' fears that the debt crisis could spread further. |
The two leaders agreed to press for closer economic integration within the eurozone, but did not announce any specific measures to tackle the crisis. | The two leaders agreed to press for closer economic integration within the eurozone, but did not announce any specific measures to tackle the crisis. |
Shares opened sharply lower before recovering, with Frankfurt's Dax index down 0.5% and London's FTSE 100 flat. | Shares opened sharply lower before recovering, with Frankfurt's Dax index down 0.5% and London's FTSE 100 flat. |
The gold price also hit a new a record high, reflecting continued uncertainty. | The gold price also hit a new a record high, reflecting continued uncertainty. |
After falling back towards the end of last week, the price hit $1,795 an ounce in early trading before slipping slightly. | |
In New York, the Dow Jones index opened up 0.5%. | |
A proposed tax on financial transactions hit bank shares. | |
Commerzbank fell by 4%, while Royal Bank of Scotland and BNP Paribas were down 2% towards the end of trading. Shares in exchange operators also suffered, with Deutsche Boerse losing 5% and the London Stock Exchange falling 3.6%. | |
The tax could be used to raise money to help bolster any future bailout funds, but the proposal has already met with opposition from one member state. | The tax could be used to raise money to help bolster any future bailout funds, but the proposal has already met with opposition from one member state. |
"We can't have a situation where there is a transaction tax in Dublin and there is no transaction tax in London," said the Irish Republic's Finance Minister, Michael Noonan. | "We can't have a situation where there is a transaction tax in Dublin and there is no transaction tax in London," said the Irish Republic's Finance Minister, Michael Noonan. |
Deutsche Boerse also questioned the effectiveness of a tax on financial institutions. | |
"Such a tax generates incentives to switch even more to niches that are not covered by this tax and would be a gift for the unregulated financial centers and financial products in this world," the exchange said. | |
Eurobonds | Eurobonds |
German Chancellor Angela Merkel and French President Nicolas Sarkozy called on Tuesday night for "true economic governance" for the eurozone in response to the debt crisis. | German Chancellor Angela Merkel and French President Nicolas Sarkozy called on Tuesday night for "true economic governance" for the eurozone in response to the debt crisis. |
The leaders called for much closer economic policy in the eurozone, but said that this could only be achieved by a "step-by-step" process. | The leaders called for much closer economic policy in the eurozone, but said that this could only be achieved by a "step-by-step" process. |
Mrs Merkel also stressed that issuing so-called eurobonds - IOUs issued to investors backed by the eurozone as a whole rather than individual countries - would not be on the agenda until closer economic union had been achieved. | Mrs Merkel also stressed that issuing so-called eurobonds - IOUs issued to investors backed by the eurozone as a whole rather than individual countries - would not be on the agenda until closer economic union had been achieved. |
Some policymakers and investors have argued that issuing these bonds would go a long way to calming volatile stock markets and resolving the debt crisis. | Some policymakers and investors have argued that issuing these bonds would go a long way to calming volatile stock markets and resolving the debt crisis. |
Both the Italian Finance Minister, Giulio Tremonti, and billionaire investor George Soros have backed the idea. | Both the Italian Finance Minister, Giulio Tremonti, and billionaire investor George Soros have backed the idea. |
Harmonising tax | Harmonising tax |
To tackle concerns about high levels of debt among eurozone governments in general, Mrs Merkel and Mr Sarkozy proposed that a requirement for member states to balance their budgets should be enshrined in each of their constitutions by the summer of 2012. | To tackle concerns about high levels of debt among eurozone governments in general, Mrs Merkel and Mr Sarkozy proposed that a requirement for member states to balance their budgets should be enshrined in each of their constitutions by the summer of 2012. |
In another initiative to increase tax revenues, the leaders advocated harmonising corporate tax rates across the single currency. | In another initiative to increase tax revenues, the leaders advocated harmonising corporate tax rates across the single currency. |
The two leaders also said they wanted bi-annual meetings of the 17 heads of the eurozone governments, chaired by Herman van Rompuy, the current president of the European Council. | The two leaders also said they wanted bi-annual meetings of the 17 heads of the eurozone governments, chaired by Herman van Rompuy, the current president of the European Council. |
As well as proposals for the eurozone as a whole, the meeting also came up with some bilateral plans between Germany and France. | As well as proposals for the eurozone as a whole, the meeting also came up with some bilateral plans between Germany and France. |
These included plans for a joint proposal on a financial transactions tax and meetings to exchange views about economic and budgetary policies. | These included plans for a joint proposal on a financial transactions tax and meetings to exchange views about economic and budgetary policies. |
In addition, French and German finance ministers are to come up with ideas to increase the convergence and competitiveness of the two economies, in particular a proposal for a joint business tax. | In addition, French and German finance ministers are to come up with ideas to increase the convergence and competitiveness of the two economies, in particular a proposal for a joint business tax. |
Patrice Perois at Kepler Capital Markets said: "There weren't any scoops as the proposals had been mentioned over the past few days. Overall, the outcome of the meeting wasn't convincing, with no eurobond project." | Patrice Perois at Kepler Capital Markets said: "There weren't any scoops as the proposals had been mentioned over the past few days. Overall, the outcome of the meeting wasn't convincing, with no eurobond project." |
Chancellor Merkel and President Sarkozy were meeting in Paris in the wake of recent turmoil on the financial markets, which came amid fears of a renewed global recession and concerns that Spain and Italy may be dragged into the debt crisis. | Chancellor Merkel and President Sarkozy were meeting in Paris in the wake of recent turmoil on the financial markets, which came amid fears of a renewed global recession and concerns that Spain and Italy may be dragged into the debt crisis. |