PARIS The leaders of France and Germany called Tuesday for greater economic discipline and unity among European nations but declined to take the expensive financial measures seen by many investors as the only way to halt the continents spiraling debt crisis.
The Dow Jones industrial average fell, the euro slid against the dollar and key European markets edged down in off-hour trading after Chancellor Angela Merkel of Germany and French President Nicolas Sarkozy announced the results of their emergency talks in Paris.
Sarkozy called for a new economic government for Europe that would meet at least twice a year with European Union President Herman Van Rompuy as its head, but he offered few other details or indications that the body would have real power.
Merkel and Sarkozy also called for all eurozone nations to enact constitutional amendments requiring balanced budgets. They said they want the process completed by the summer of 2012, but it would almost certainly run into protracted political difficulties in many countries.
Both leaders said the moment was not right to replace 17 government bonds with a single one allowing weaker economies to borrow in cooperation with the powerhouse economies of France and Germany. A growing number of experts are calling for the eurobond as a way to prevent the unaffordable interest rates that have driven Greece, Ireland and Portugal to seek bailouts from the eurozone countries and the International Monetary Fund.
New figures show slowing French and German growth, and the German government fears it would face higher borrowing costs and more risks if it had to borrow jointly with financially shaky nations.
We have exactly the same position on euro bonds, Sarkozy said. One day we could imagine them, but at the end of a process of European integration, not at the beginning.
The Dow fell as many as 190 points shortly after 1 p.m. in New York, a sign of clear market disappointment with the lack of immediate action.
Merkel and Sarkozy also said they did not want to increase the size of the EUs 440 billion euro rescue fund, which may have to take over a massive, multibillion euro European Central Bank program to support the prices of Spanish and Italian bonds by buying them up on the open market. The ECB spent 22 billion euros, about $32 billion, in the first week of the program alone and says it wants to hand off that responsibility in coming months to the rescue fund, or European Financial Stability Facility.
Sarkozy described the EFSFs current funding as a considerable sum and sufficient.
The two leaders also proposed a Europe-wide tax on financial transactions and pledged to harmonize their countries corporate taxes in a move aimed at showing the eurozones largest members are marching in lockstep to protect the euro.
Shares of financial markets operators, such as NYSE Euronext and the IntercontinentalExchange Inc., already under pressure as part of a broader sell-off of financial stocks, tumbled.
NYSE Euronext fell 10 percent, or $2.87, to $26.10, leading the S&P 500 Index in percentage losses. The IntercontinentalExchange was not far behind, falling 5.5 percent, or $6.33, to $110.10, the third biggest loser on the S&P.
Investors may be concerned about how the euro bloc will put in place what its leaders have suggested and how a proposed tax on financial transactions may effect demand for European assets, said David Gilmore of Foreign Exchange Analytics in Essex, Connecticut.
On the surface, it sounds very bold, a federal eurozone, Gilmore said. The practical part still seems, to me anyway, to be a pipe dream.
He said the plan to form a deeper fiscal union among the 17 countries using the euro made the euro credible, but governments might not want to surrender their rights to set tax and budget policies.
But some analysts say only tighter fiscal convergence between the euro zones 17 members, with the blocks strongest members guaranteeing the debts of the weaker partners, will resolve a crisis that has dragged on for nearly two years and resulted in a string of sovereign bailouts worth hundreds of billions of euros.
Sarkozy and Merkel stressed their commitment to defending the common currency, a cornerstone of integration on this long-fractured continent. They presented their proposals after meeting Tuesday in Paris amid signs of economic slowdown, and after an exceptionally turbulent week on financial markets prompted by concern about Europes financial health.