LONDON (AP) â¿¿ Renewed uncertainty over Europe's sprawling debt crisis following elections in Greece and France weighed on stock markets Monday, with the main exchange in Athens down a massive 8 percent at one stage.
Investors have been particularly spooked by the Sunday election in Greece, which resulted in a split Parliament with no party likely to be able to form a government. The two parties that governed as a coalition for the past six months were pummeled to the benefit of more extreme parties of the right and left. The socialist Pasok party suffered the biggest retreat. Its share of the vote collapsed from around 43 percent in the last election in 2009 to a little over 13 percent.
A period of uncertainty looms for the bailed-out country, which is in its fifth year of recession and has over half its youth out of work following big spending cuts and tax increases in return for crucial international bailout funds. If no government can be formed that can command a majority in Parliament, another general election within the next two months seems possible."Financial markets loath uncertainty, and so the reaction seen to the elections makes a great deal of sense," said David White, a trader at Spreadex. With more than 99 percent of the vote counted, conservative New Democracy led with 18.9 percent and 108 of Parliament's 300 seats. Party leader Antonis Samaras, who backs Greece's bailout commitments for austerity, will launch coalition-forming talks later in the day. Further weighing on sentiment is Sunday's defeat of French President Nicolas Sarkozy to his socialist rival Francois Hollande, who has campaigned on the need for more growth-generating economic policies and less reliance on austerity. While economists agree more growth would help fight the debt crisis, some fear Hollande could upset the current balance in European policies, with uncertain consequences.