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French efforts settle markets, but rebound remains very fragile

French bankers and officials scrambled to calm nerves Thursday after two days of whipsaw trading that saw their banks' market value fall and rise by billions of euros.

By late in the day, those efforts appeared to settle markets jittery about the health of French banks and the heavily indebted U.S. and European economies. Economists said the rebound remained very fragile.

The leaders of the eurozone's biggest economies, Germany and France, announced they will meet Tuesday to discuss solutions to Europe's financial difficulties.

French President Nicolas Sarkozy's office said that the two will come up with "joint proposals" on the governance of the eurozone before the end of the summer. Chancellor Angela Merkel's spokesman said the meeting would focus on suggestions for how to improve the zone's economic policy and crisis management.

Bank of France head Christian Noyer blamed "unfounded rumors" for plunges in the shares of top banks, including Societe Generale and BNP Paribas, and said the country's financial institutions were sound. The country's market regulator warned of sanctions against anyone who fuels or profits from rumors that fed the sell-off.

Noyer said that French banks' first-half earnings "confirmed their solidity in a difficult economic environment," and that the banks' capital cushions were healthy.

The stocks continued to drop until strong U.S. jobs data helped propel solid gains on Wall Street late in the European trading day. BNP Paribas closed up 0.3 percent, and Societe Generale rose 3.7 percent.

The European Union's markets supervisor said regulators were increasing surveillance of financial markets following the days of steep sell-offs. Monday, Greece banned short-selling -- profiting from bets on the decline in a share price -- but no other national regulators have followed suit so far. Consob, Italy's stock market watchdog, said it would meet this morning before the markets open to decide whether or not to take measures about short-selling, which has been blamed for contributing to market volatility.

France's growth prospects are considerably better than those of Italy and Spain's, but its economic expansion is slowing, and it's failed for years to reduce a deficit that stood at 7.1 percent last year. No other eurozone economy with a triple-A rating has a higher debt than France's -- around 85 percent of national income.

Adding to market worries, French presidential elections scheduled for the spring of 2012 may make it difficult for the government to implement further austerity measures.