ECB will not buy Spain's debt

European shares plunged to 14-month lows on Friday after a steep sell-off in global markets on growing concerns the US economy could be heading towards another recession and on jitters the euro zone debt crisis could spread to Italy and Spain as well.

At 0708 GMT, the FTSEurofirst 300 index of top European shares was down 2.8 percent at 964.73 points after touching 961.45, the lowest since May of 2010. The index, down for a sixth straight session, has fallen nearly 11 percent this week and is down about 14 percent so for this year.

Leaders from European powerhouses Germany and France will hold talks on Friday after a global market rout signalled fear Europe''s debt crisis is spinning out of control and a US recovery is stalling.

French President Nicolas Sarkozy will discuss financial markets with German Chancellor Angela Merkel and Spanish Prime Minister Jose Luis Rodriguez Zapatero, Sarkozy''s office said in a statement.

Concerns that the US economy is sliding into recession after a flurry of weak data and Europe''s sovereign debt problems are deepening sparked panic selling, triggering the worst sell-off on Wall Street since the global financial crisis.

Investors slashed positions after the European Central Bank failed to include Italy and Spain in a fresh round of bond buying, even though yields on their debt shot above 6 percent, the highest level since the euro was launched over a decade ago.

ECB President Jean-Claude Trichet said there was not full support in the central bank for the action, underscoring deep divisions within Europe over how to handle a debt crisis that has forced Greece, Ireland and Portugal to seek financial rescues. Investors worry that Italy and Spain, the euro area''s third- and fourth-biggest economies, could be next.

Sarkozy said France, Germany and Spain had talked to Trichet. US officials from the Federal Reserve, the US Treasury and the White House declined to comment on whether they were holding any discussions with European or Asian officials.

Investors had hoped the ECB would target Spanish and Italian debt in reviving its bond-buying stimulus program, but it restricted the purchases to Irish and Portuguese securities.

Roberto Perli, managing director at ISI Group and a former staffer at the Federal Reserve, called the ECB''s action "mysterious."

"It sent the wrong message," he said. Analysts said the ECB needed to start buying Italian and Spanish bonds to prevent the debt crises from spreading and so quell investor anxiety.

They also said they would look to see if European leaders are willing to expand its emergency financial stability fund to an amount that would put a floor under the market panic.

They say the fund, currently 440 billion euros, would need to be doubled or tripled to cover economies as big as Italy and Spain.