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European shares fall, as Angela Merkel becomes increasingly isolated

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European shares fall, as Angela Merkel becomes increasingly isolated
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Europes top shares fell on Wednesday morning, reversing previous rallies as investors exercise caution ahead of an EU meeting.

Basic resource stocks, the last session’s top gainers were this session’s sharpest fallers, while banks – which remain heavily exposed to the fortunes of the eurozone – also posted early losses.

European leaders are expected to talk of ways to breathe life into Europe’s struggling economies, and the issue of using euro bonds to try to alliaviate two years of debt turmoil.

It’s understood France’s new president, Francois Hollande, is in favour of the bonds, while German chancellor, Angela Merkel, remains against the idea.

At all previous summits Hollande’s predecessor, Nicolas Sarkozy, had met with Merkel and agreed a strategy before hand, but now with Hollande in power the dynamic has changed significantly.

His call for a focus on growth has rallied many leaders across Europe, while Merkel continues to favour austerity as the best path to solving the crisis.

The charismatic leader of Greece’s biggest anti-bailout party paid a visit to Berlin a day ahead of the summit, although he did not meet with any members of Merkel’s coalition government, highlighting Berlin’s growing exasperation with Greek politicians.

Alexander Dobrindt, Deputy Leader of the Christian Social Democrats – one of the three parties in Angela Merkels centre right coalition – said that if the anti-austerity radicals win the election in Greece on June 17, the country’s from the euro will be unavoidable.

He added that the tough spending cuts, tax hikes and other reforms agreed with lenders in return for 130 billion euros of loans are non-negotiable.