Fears for euro as voters vent anger
FEARS were growing over the future of the single currency last night in the aftermath of elections that threw out another two European governments.
German Chancellor Angela Merkel said that renegotiating Europe’s new “fiscal pact” is not on the cards despite the election of a new French President, Francois Hollande, who has made overhauling the pact one of his key election promises.
And the Greek political landscape descended into chaos after elections resulted in no party winning enough seats to form a government. Greek stocks plunged as the New Democracy party, which won the largest vote share, said it could not persuade any other parties to strike a deal.
That means the runner-up “radical left” Syriza party, led by Alexis Tsipras, will today receive a formal mandate to open coalition talks, but its chances of finding enough support for a parliamentary majority are slim.
Tsipras has promised to throw out Greece’s bailout deal if he does win power. And if Greece does not produce a government, it is likely to have its next installment of bailout aid withheld, which could push the country into a disorderly default on its debts and an exit from euro.
Merkel last night warned that “it is of course of utmost importance that the programmes we agreed with Greece continue”.
In Spain, expectations are growing that Madrid could seek help from Europe’s bailout fund to prop up its struggling banks. The news of a new mass bank rescue pushed European stocks into a rally despite the uncertain political landscape: the Eurostoxx 50 jumped 1.55 per cent and Germany’s Dax rose 0.12 per cent. France’s equities were also boosted by the end of its presidential elections, with shares in the CAC40 index rising 1.65 per cent.
The French government’s borrowing costs fell on the first trading day after the election, with yields on 10-year bonds dropping 0.031 percentage points to 2.8 per cent.
But Athens’ stock market ended the day down 6.7 per cent, at its lowest level since January. Yields on Greece’s 10-year bonds jumped 2.4 percentage points to 23 per cent, the highest level since its most recent bailout was agreed.