A much-touted meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy over strategies to cope with the euro zone’s debt woes disappointed investors Tuesday, and stocks echoed their disappointment in Wednesday morning trading, moving lower.
While the two leaders discussed plans to defend the euro and spoke of a future fiscal union, they failed to push for an increase in the euro zone’s rescue fund and did not discuss euro bonds. That last did not satisfy investors, who took out their frustrations on the market. From Asia to Europe markets were lower, despite calls for a “golden rule” to be woven into euro zone nations’ constitutions that would obligate them to work toward balanced budgets and debt reduction.
The New York Times reported that both leaders dismissed the idea of a common euro bond, upsetting bond traders concerned about investments in debt already on the market. The two also opposed increasing the rescue fund, already regarded as insufficient in size to cope with debt problems in Spain and Italy; as it is, the new rescue fund will not be implemented at the earliest until late September.