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Euro declines on French and Greek election results

Published: May 7, 2012 | 7:57 am
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The euro fell against the dollar and the pound on Monday following weekend election results.

Two parties that support bailouts appear to have lost their majority in Greece, while in France, Francois Hollande has taken the presidency promising to rework debt deals.

The euro fell as low as $1.295, its lowest since January, and dropped to three-year lows against the pound.

European stock markets fell, with Germany’s Dax opening 2.2% lower.

The Cac 40 in Paris opened down 1.7%. London markets are closed for a public holiday.

European markets had also fallen sharply on Friday following the release of US unemployment figures.

Asian markets also fell, with the Nikkei in Tokyo dropping 2.8%.

South Korea’s Kospi shed 1.8% and Hong Kong’s Hang Seng dropped 2.4%.

‘Time bomb’

In Greece, the socialist Pasok party saw an unexpectedly poor result, while Syriza, which has opposed austerity measures, had a strong performance.

The result has cast doubt on whether the country’s policies that currently include spending cuts, tax increases and state job losses, can continue.

“The Greek side of things is a ticking time bomb,” Justin Harper of IG Markets told the BBC.

“The fear now is that all the hard work that had gone into getting the second bailout package may start to unravel and we can expect some real pressure on stock markets in the coming days.”

While the French result was expected, there is still concern about whether Mr Hollande will be able to work as closely with German Chancellor Angela Merkel as his predecessor Nicolas Sarkozy did.

The two were the driving force behind the eurozone’s fiscal compact.

Mr Hollande stood on a platform of promoting growth rather than concentrating on austerity.

“The Merkel-Hollande initiative will never materialise due to Hollande and Merkel being polar opposites with no chance to agree on anything,” Jeff Sica, president of SICA Wealth Management.

BBC

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