Euro leaders fall short (again!) as crisis spirals

NEW YORK (CNNMoney) -- European politicians are facing renewed criticism for being slow to respond as the debt crisis in the eurozone has taken a turn for the worse.

The latest informal gathering of European Union leaders ran into the early hours Thursday morning, but it failed to produce any new solutions to the region's most pressing problems.

While the leaders promised to come up with more concrete proposals at their next summit in June, some investors fear that policy makers are falling behind the curve.

"Most worrying is the slow pace of action from policy makers," said Michala Marcussen, an economist at Societe Generale, in a note to clients. "This reinforces the sense of déjà-vu from 2011, already visible in financial markets."

One of the biggest drivers of the turmoil in financial markets late last year was a sense among investors that EU officials were unwilling or unable to agree on a common policy response to the crisis.

Those fears were eclipsed earlier this year by aggressive moves by the European Central Bank, which funneled more than €1 trillion into the banking system.

The renewed worries about political dysfunction come after elections earlier this month upset the balance of power in Europe.

In particular, France and Germany are at odds over the issue of euro bonds, which would centralize the debts of all 17 nations in the eurozone.

OECD: Europe debt could derail global recovery

François Hollande, the newly-elected French president, has said euro bonds should be considered as one of the potential solutions to the structural problems in the eurozone. But German Chancellor Angela Merkel maintains that the crisis stems from a lack of fiscal discipline and that pooling government debt is not the answer.

"They don't seem to be able to come up with a workable solution," said Tom Cooley, economics professor at the NYU Stern School of Business. "There isn't going to be any easy way out of this. But there can be better solutions if they recognize that there are mutual concerns and start working together."

The leaders did agree that boosting economic growth and reducing government debt are not mutually exclusive. They outlined a three-pronged strategy of relatively modest proposals to support growth, saying more substantial moves will be "decided" at next month's meeting.

Eurozone economy 'in dire straits'

Yet the talks ended without any new measures for Greece, which is arguably the most urgent issue facing European policy makers.

Greece is in the midst of a political crisis that has raised fears it could become the first country to exit the euro currency union. Greece is set to hold a second round of voting on June 17 next month after an election earlier this month failed to result in a governing collation.

EU leaders say they want Greece to remain in the eurozone, while stressing that the nation must abide by the terms of its bailout agreement. But there is speculation that eurozone finance ministers have already begun planning for a Greek exit.

The threat of a messy break in the eurozone have led to fears of consumers massively pulling funds from banks and raised calls for some form of bank deposit insurance across the eurozone. But it remains to be seen how such a scheme would be funded given the reluctance to expand the powers of the region's bailout fund.

Overall, the talks were "a waste of time for everyone," said Carl Weinberg, chief economist at High Frequency Economics. He said political discord prevented the leaders from making progress on any of the issues they had hoped to resolve.

"The crisis is festering, and resolution without blow-up seems even less likely," said Weinberg.