Markets slide as Greece is forced to call new election
THE value of the euro fell and stocks slumped today on news that Greece will hold a second election after politicians failed to agree a ruling coalition.
Fears are also growing that Greece may have to leave the eurozone unless it agrees to implement tough austerity measures.
The ongoing uncertainty facing Greece and the euro came as French president Francois Hollande flew to meet Germany's Angela Merkel for key first talks following his election.
The euro fell in value while European stock markets also fell as the cost of borrowing for many countries, including Ireland, spiked.
The euro was worth just over $1.27 just after lunchtime on news of the new Greek election and fears for the country’s future in the region and the contagion if it were to leave the eurozone.
While no date has been set for a vote, according to election rules it will be held in mid-June.
No party won an outright majority in the May 6 election and there has been growing uncertainty ever since.
The Greek stock market today fell to levels not seen since 1990 and was off 4.6pc.
In France, the CAC dropped 1.1pc and Germany’s DAX fell 1.4pc extending yesterday’s losses.
Spain’s IBEX fell 1.6pc and Italy’s FTSE MIB dropped 1.8pc as markets digested the uncertainty.
US markets were a bit more sanguine about the future of Greece and the euro and the Dow Jones opened up 0.2pc at 12,715 points.
Figures released today show that the eurozone has narrowly avoided falling back into recession, with the area’s economy showing 0pc growth in the first quarter.
The region's economic output went backwards in the last quarter of 2011, shrinking 0.3pc.
France’s economy did not grow in the first quarter of the year, raising concerns that the country could be headed towards a recession.
But there was better news in Germany, where the economy grew by a stronger-than-expected 0.5pc in the first three months of the year despite Europe's debt crisis.
French GDP was stagnant from January to March, the national statistics agency Insee said.
It also revised down growth in the fourth quarter of last year from 0.2pc to 0.1pc. Some analysts expect GDP to start contracting next quarter.
The news came on the same day that President Hollande takes office, vowing to restore France's growth by investing in infrastructure and small businesses.
But he has also promised to rein in the deficit - a task made harder by stagnating growth.
Mr Hollande built his programme around an expectation of 0.5pc GDP growth for the year.
That is in line with the EU's forecast.
In Germany, exports helped the economy bounce back from a slight fall in output of 0.2pc in the fourth quarter of last year, the government statistics agency said.
Germany remains a standout performer despite Europe's troubles with too much debt in several countries. Unemployment is low and exports of manufactured goods such as cars and machinery remain robust. Compared with the same quarter a year ago, Germany grew 1.7pc.
Finance Minister Michael Noonan left Brussels today after two day of talks with European finance ministers which focused on the Greek crisis and the knock-on effects in Europe.