August 17, 2011- German Chancellor Angela Merkel and French President Nicolas Sarkozy unveiled their plans for new economic governance that is seen to be essential in the euro zone as fiscal integration around the region’s single currency is thought to be necessary.
Concerns continued, as the meeting did not contribute to any new concrete measures about how to tackle the immediate concerns in the region: the funding for the weaker states in the euro zone.
This pessimism over the German/French plan only increased investors appetite for assets that were a safe haven, increasing the German Bond futures while the bond yields over five basis points lowered to under 2.3%.
German two-year bonds were also trading higher even though there was poor demand with investor’s safety concerns not even enough to compensate for the poor returns they offered.
The German and French leaders laid the fiscal union groundwork for the future promising to work together and defend the euro. They also said a president was needed to represent the euro zone and called upon the ministers of finance to prepare proposals for a corporate tax base that would be common among members.
That still was not enough, however, as the markets had hoped for more concrete comments and reference to common bond issuance for the euro zone.