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Shares fall to 2012 low after Greece calls new election

EUROPEAN shares closed at their lowest level since the start of the year, led by a fresh slide in eurozone banks, after attempts to form a government in Greece collapsed.

European stocks dropped for a second day, pushing the Stoxx Europe 600 Index to its lowest level since December, as Greek leaders gave up all attempts for forge a new administration.

"We've got a downwards and sideways stance on the market," said Hartmann Capital equities and derivatives sales trader Basil Petrides.

"At the moment, a lot of money is being sidelined. People don't really know where to put it," he added.

The euro fell to a 31/2-year low against sterling on worries about the political instability in Greece. That left one euro worth 79.6p, its weakest level since November 2008.

Investors have been piling into sterling as the euro crisis has stepped up a gear. That's good for Irish exporters, but will make the cost of many imports more expensive.

"People aren't buying sterling because they think UK growth is great. They're buying sterling because it's not the euro," said Adrian Schmidt, currency strategist at Lloyds.

Eurozone banking stocks led fallers across the region, down 3.7pc, with France's Credit Agricole the worst hit, down 7pc.

In Athens, the benchmark stock index fell 3.6pc to its lowest level in 20 years, while in Spain, firmly in bond market sights as fears of fresh contagion grow, the IBEX was down 1.6pc, its lowest level in around nine years. In Dublin, the ISEQ was little changed.

Banks posted the biggest contribution to the Stoxx 600's decline. Julius Baer plunged 6.1pc, its biggest slide in almost eight months, as revenue from assets under management fell in the first four months.

"Equities look cheap, but we all know why," said Didier Saint-Georges, a member of the investment committee at Carmignac Gestion, which oversees about €50bn. "Valuations are not necessarily pointing to any clear direction. For Europe, you just don't need growth, but also very profound adjustments both fiscal and external, and that won't happen quickly."

Germany's Finance Minister Wolfgang Schaeuble said Greece must elect a government that sticks to the terms of its international bailout if it wants to stay in the euro.

"If Greece -- and this is the will of the great majority -- wants to stay in the euro then they have to accept the conditions," Mr Schaeuble said. "Otherwise it isn't possible."

Irish Independent