EUROPEAN shares sunk to a four-month closing low yesterday as question marks over Greece's commitment to its bailout pledges heaped markets with further uncertainty as to how the eurozone debt crisis will play out.
The Athens bourse slid 3.6% to its lowest level since late 1992, pressured by the banking sector, which dropped 10%. In London, the FTSE-100 index gave up more than 100 points to end the day at its lowest close this year, down 1.8% at 5554.55 points.
France's CAC 40 lost 2.8%, while Wall Street's benchmark Standard & Poor's 500 hit a two-month low.
"Greece is basically a zombie state right now," said Rick Fier, director of trading at Conifer Securities in New York. He said it would be difficult for Greece to raise money to pay off its debt, whether or not it stays in the eurozone.
Leftist leader Alexis Tsipras began efforts to form a Greek government by renouncing the terms of an international bailout and threatening to nationalise banks in a statement likely to reduce his chances of success.
Leading German politicians warned Greece it would not receive more aid unless it fulfills all the conditions of its international bailout.
As Europe's largest economy, Germany has contributed the biggest share of the financial guarantees under Greece's bailout, which is paid out in instalments on the condition Athens meets specific savings goals.
"The agreements must be respected. I don't think we can or should renegotiate," said Martin Schulz, a German politician and president of the European Parliament, on a visit to Berlin.
Gerda Hasselfeldt, a senior member of the Bavarian Christian Social Union, sister party to Chancellor Angela Merkel's Christian Democratic Union, echoed Mr Schulz in warning Greece against any backsliding.
"Our position is unchanged. Aid can only flow if the conditions are met," said Ms Hasselfeldt.
Greece must push a new round of spending cuts through parliament next month to qualify for an €11.5 billion (£9.3bn) aid instalment it needs to avoid bankruptcy. The post-election deadlock has raised questions about whether that timeline can be met.
The vote in Greece and the victory of Socialist Francois Hollande in the French presidential election at the weekend underscored a growing backlash against austerity measures favoured by Berlin as the way out of the single currency bloc's debt crisis.
France is struggling with weak economic growth, a gaping trade deficit, 10% unemployment and strained public finances that prompted ratings agency Standard & Poor's to cut its triple-A credit rating in January.
Despite this backdrop, Mr Hollande promised during his campaign to raise the minimum wage, hire tens of thousands of new teachers and dilute the increase in France's retirement age that outgoing President Nicolas Sarkozy pushed through against strong opposition from unions and the French left.
Mr Hollande has promised to push back against German austerity policies, but many expect him to water down his plans after an audit of state finances that could be completed next month.
Ms Merkel, who publicly supported Mr Sarkozy in the French election, telephoned Mr Hollande on Sunday after his victory and invited him to Berlin for talks. The two leaders are due to meet next week, after Mr Hollande is sworn in as president, to try to iron out their differences.
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