The leaders of France and Germany disappointed financial markets Tuesday
by ruling out issuing euro bonds to fix Europe's debt crisis.
Instead, they agreed to float proposals in September for a tax on financial transactions and push for closer joint governance of economic policy. Many experts say the only way to ensure affordable financing for the bloc's most financially distressed countries would be for the euro area to issue joint eurobonds. But both French President Nicolas Sarkozy and German Chancellor Angela Merkel said they believed euro bonds were not part of the solution to Europe's debt crisis.
Stocks fell further in the US as investors were disappointed that the two leaders didn't endorse the idea of a euro bond. Treasury prices reversed losses and yields hit session lows. The euro briefly recouped losses against the dollar. Oil prices fell while gold prices rose.
German Chancellor Angela Merkel and
France's President Nicolas Sarkozy speak
at a meeting on debt crisis.
Sarkozy and Merkel also proposed that all 17 euro zone countries commit to balanced finances and write that goal into their constitutional law by summer 2012.
Among other measures announced, he said they would also seek to ensure better cross-border economic government for the euro zone via twice-yearly meetings of leaders and the creation of a two-and-a-half-year presidency to steer this forum. "We want to express our absolute will to defend the euro and assume Germany and France's particular responsibilities in Europe and to have on all of these subjects a complete unity of views,'' Sarkozy told a news conference at his Elysee Palace offices, where he was flanked by Merkel.
The two are under pressure to come up with plans to shore up the euro zone and restore financial market confidence after a year and a half of turmoil that has refused to die down despite bailouts of Greece, Ireland and Portugal and the creation of an anti-contagion fund. The widely watched meeting came amid signs of economic slowdown and after an exceptionally turbulent week on financial markets prompted by concern about Europe's financial health.
Italy has been forced to ramp up its austerity measures and financial market jitters hit France last week with French banks' shares subject to panic selling on rumors that the country could be next to lose its prized AAA debt rating. Although the German government has long opposed the idea of issuing euro bonds, support is beginning to emerge, with the country's export association saying on Monday that all other means of fighting the crisis had run out. Italian Economy Minister Giulio Tremonti said on Saturday that eurobonds would be the best solution to Europe's debt crisis , and some economists say that the euro zone will inevitably come around to accepting the idea. French economist Jacques Delpla, who co-authored a paper proposing how eurobonds could work, said the eurozone faced collapse unless leaders went beyond an agreement reached at a July 21 emergency summit on the debt crisis.
If you do not understand the mechanisms of what is being proposed and done in Europe / US to supposedly fix this crisis, don't sweat it; hardly anyone understands how these things really work. The bottom line is that whatever they do will not work because it is not meant to fix anything. The decision to decapitate the Middle Class worldwide, and HUMANICIDE the lower classes was made a long time ago; what we are seeing right now is the plane being put into action. If you are Middle Class now, you will be the POOR class very soon; all that will be left will be the RICH and the POOR. It may seem like I am fear-mongering but what I am telling you is the reality of what is happening in our world today. Evaluate your own situation and do what you need to do to prepare for a complete collapse of the System, no banks, no money, no food! People think that such catastrophic conditions are the exception in human history whereas they are the rule in human history. Since people don't know history, they repeat it time and time and time again. What is coming has been seen on a regional basis but never on a Global basis, so in reality this collapse and the ensuing chaos and butchery will be unprecedented.