Hollande, Merkel fail to stop market slide as Greece faces new election

European stock markets were down Wednesday and the euro fell to its lowest level for four months, despite new French President François Hollande and German Chancellor Angela Merkel’s insistence that they want Athens to stay in the eurozone at their first meeting on Tuesday evening in Berlin.

Reuters/Jacky Naegelen

After final attempts to form a Greek government failed Tuesday, the country faced the prospect of a new general election, now set to take place on 17 June, less than six weeks after the previous one.

Hollande rushed to Berlin to see Merkel on the day of his swearing-in and the two declared that they want Greece to stay in the euro, with Merkel adding that they were ready to “study the possibility of additional growth measures in Greece”.

That failed to stop the fall on the stock markets, with Paris down 0.95 per cent, Frankfurt down 1.23 per cent and Madrid down 1.87 per cent.

The euro fell to a four-month low of 1.27 to the dollar.

On Wednesday German Finance Minister Wolfgang Schaeuuble insisted that the Greek bailout could not be renegotiated.

And International Monetary Fund chief Christine Lagarde on Tuesday indicated that world finance bosses are preparing for Greece to go.

"If the country's budgetary commitments are not honoured, there are appropriate revisions to do ... which in this case must be an orderly exit," she told RFI’s sister TV station France 24.

About 700 million euros were withdrawn from Greek banks on Monday, President Carolos Papoulias said on Monday.

At the Berlin meeting Merkel again rejected Hollande’s call for the eurozone budgetary pact be renegotiated, while the French president stuck to his guns.

French Socialist politicians insist that there will be more chances to discuss their proposal that measures to boost growth be introduced before a European summit at the end of June.

US Treasury Secretary Timothy Geithner has supported the idea.

"We should welcome this new debate about growth in Europe," Geithner said at a conference in Washington.

The eurozone failed to realise any growth in the first quarter of 2012, saved from negative growth by Germany’s 0.5 per cent rise.

France experienced zero growth.