Markets fall as Merkel-Sarkozy debt talks disappoint
European shares have fallen after talks between French and German leaders failed 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.
Frankfurt's Dax and London's FTSE 100 indexes fell about 1%, while the Cac 40 in Paris lost about 0.2%.
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.
A proposed tax on financial transactions also hit bank shares.
Deutsche Bank, BNP Paribas and Barclays all fell by about 3%. Shares in the London Stock Exchange and Deutsche Boerse also fell by a similar amount.
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.
EurobondsGerman 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.
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.
Continue reading the main storySome 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.
Harmonising taxTo tackle concerns about high levels of debt among eurozone governments in general, Mrs Merkel also proposed that a requirement for member states to balance their budgets should be enshrined in each of their constitutions.
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.
"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," said Patrice Perois at Kepler Capital Markets.
Mrs Merkel and Mr 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.
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