Eurozone in hectic talks
French President Nicolas Sarkozy on Thursday called a meeting with German Chancellor Angela Merkel amid market turmoil to find solutions to the eurozone debt crisis, as European regulators increased surveillance of financial markets following days of steep sell-offs.india Updated: Aug 12, 2011 02:46 IST
French President Nicolas Sarkozy on Thursday called a meeting with German Chancellor Angela Merkel amid market turmoil to find solutions to the eurozone debt crisis, as European regulators increased surveillance of financial markets following days of steep sell-offs.
Merkel will travel next Tuesday to Paris for the meeting which is aimed at producing "joint proposals" on the governance of the eurozone before the end of the summer, Sarkozy's office said in a statement.
The announcement came as financial markets worldwide were in turmoil on concerns that the US and eurozone debt crisis may bring a new recession and France may be the latest casualty in the rating game.
French banking shares were hammered by worries about their stability, knocking European share indexes back into the red after an initial bounce.
Rumours about the French sovereign debt downgrade, an expanded bailout for Greece that would hurt French banks, and a government bailout of Societe Generale, pulled shares of France's second-largest bank down in the heaviest volume since the 2008 financial crisis. The European stock index has fallen about 21% in about one month into a "bear market" territory, characterised by a drop of more than 20% over a certain period.
"There aren't fresh rumours, but we're seeing mounting concerns of systemic risk out there," said Lionel Jardin, head of institutional sales at Assya Capital in Paris. "We haven't seen panic selling yet, but people don't want to be caught off guard."
Meanwhile, Bank of America-Merrill Lynch cut the European banking sector to "neutral" from "overweight", its latest downgrade to global growth expectations made it difficult to sustain conviction in the argument.