Investors: Merkel, Sarkozy Plan a Letdown

Yesterday's meeting of French President Nicolas Sarkozy and German Chancellor Angela Merkel underwhelmed markets, which had been hoping for more radical steps to help the euro zone, reports the Wall Street Journal. It seems investors want more than what the two proposed—among other things, an elected euro-zone president—as Sarkozy's announcement that France and Germany were against creating euro-zone bonds or enlarging bailout funds sent money streaming into US Treasurys.

"We can't solve problems in a big bang," Merkel said. "What we are proposing will allow us to regain confidence step by step." But with 17 countries sharing a currency but not fiscal authority, experts say the euro zone is fundamentally flawed—and will continue to be, unless the proposed euro-zone head is handed the power to sanction profligate spenders. "A fundamental discrepancy remains between what markets need and what politicians can offer," said one bank economist. (More France stories.)