Attempts to form a government in Greece collapsed yesterday, jolting financial markets at the prospect that radical left parties opposed to the EU bailout terms could take power in a June election and tip the eurozone deeper into crisis.
The turmoil sent shockwaves around other troubled members of the 17-nation single currency. The euro slipped below $1.28, world stocks slid, and Spanish and Italian bond yields rose above the danger level of 6% as investors scurried for shelter in German bunds.
The tremors from Greece, compounding worries about Spain’s debt-laden banking system, ended any honeymoon for new French president François Hollande, thrusting the growing risks to the eurozone to the top of the agenda for his first ever meeting with German chancellor Angela Merkel in Berlin yesterday.
After their talks, both leaders said they wanted Greece to remain in the eurozone and were ready to work to promote ideas for economic growth that could help achieve that.
After a meeting at which both stressed a commitment to the political ideal of the euro, Mr Hollande said: “I hope that we can say to the Greeks that Europe is ready to add measures to help growth and support economic activity so that there is a return to growth in Greece.”
Meanwhile, Finance Minister Michael Noonan and Brendan Howlin, the public expenditure minister, met senior officials of the European Investment Bank yesterday to secure money for infrastructure projects and job creation.
They went with a list of public-private partnership projects and schemes to get around the constraints imposed on the country by the austerity programme.
They hope to leverage “several billions of euro” to put with the €17bn the Government has for projects including schools, health centres, and infrastructure.
Mr Howlin said the ideas will form part of the talks at the growth and jobs summit in Brussels next month, where it is hoped all leaders will agree to add a growth strategy to the fiscal treaty.
The ministers believe they have convinced the troika to allow half of the money — rather than the one-third agreed — from the €3bn raised from the sale of state assets to be put into projects. They want to use the other half as well to help raise money from the EIB, using the fund as a kind of insurance, since the country has no triple-A banks that would normally be used.
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