The latest attempt to solve the eurozone sovereign debt crisis got the thumbs down from world markets yesterday, with sell-offs of equities and a further flight to safe-haven assets.
President Sarkozy of France and Chancellor Merkel of Germany had hoped their plans for much closer economic co-operation between members of the eurozone would calm investors' fears. But their failure to explain how the bloc's existing debts would berepaid – with eurobonds, for example, ruled out for now – disappointed the markets. And their proposals for a Europe-wide financial transactions tax hit financial shares particularly hard.
Michael Hewson, an analyst at CMC Markets, described the proposals as "profoundly disappointing". Overall, stock markets suffered reverses across much of Europe, lead by Britain and Germany, though rises in early US trading provided some stability. However, it was the financial sector that saw the biggest losses. Barclays Bank fell by 4.2 per cent, Royal Bank of Scotland was down 3.8 per cent, and the London Stock Exchange slipped 2.8 per cent.
Simon Lewis, of the Association for Financial Markets in Europe, said: "The financial services industry should not be seen as an additional source of tax revenue but as an essential part of a stable and sustainable economy."
The uncertainty prompted another rise in the value of the Swiss franc, seen as a safe haven, forcing the SwissNational Bank to pledge further action to drive down its "overvalued" currency. The gold price also rose, hitting an all-time high of $1,790 an ounce.