European stocks drop, euro hits 9-year low

European stock markets fell on Monday and the euro struck a nine-year low against the dollar with the ECB appearing on course to further prop up the eurozone.
London's benchmark FTSE 100 index slid 0.12 percent to stand at 6,495.17 points approaching midday in the British capital.
Frankfurt's DAX 30 dropped 0.42 percent to 9,723.25 points and the CAC 40 in Paris shed 0.72 percent to 4,221.69 compared with Friday's close.
The euro slumped to $1.1864, the lowest level since March 2006, before recovering to $1.1922. That compared with $1.2002 late on Friday in New York.
"It’s a new year but it’s the same old story... Eurozone jitters get markets wobbling again," said Jonathan Sudaria, a dealer at London Capital Group.
French President Francois Hollande on Monday urged Greece to abide by its European commitments, as the spectre of a Greek exit from the eurozone rears its head again.
Hollande's comments came amid fresh political turmoil in Greece ahead of an election on January 25 that could be won by a far-left party.
Over the weekend, the Der Spiegel weekly quoted German government sources as saying that Berlin sees a Greek exit from the eurozone as "almost inevitable" should the radical leftist Syriza party win the snap poll.
The euro's losses meanwhile added to a sell-off on Friday that came in response to an interview with European Central Bank chief Mario Draghi in German business daily Handelsblatt.
"The euro hit a nine-year low... breaking below the key 1.20 level against the dollar," noted Alistair Cotton, a dealer at Currencies Direct.
"The ECB is now expected to announce more monetary stimulus... after Mario Draghi used an interview last week to suggest the governing council is preparing for sovereign bond purchases -- which could begin as soon as January 22."
Draghi had said that deflation was a threat to the eurozone and the ECB must be prepared to counter it. He added that the risk that the central bank will not be able to push inflation up "has increased compared to six months ago".
- Greek exit? -
Political turmoil in Greece also weighed on the euro.
With a general election set for January 25, the head of the radical leftist Syriza party said Saturday that if he won he would start "necessary change" in Europe and end painful austerity policies.
Markets see a rollback of measures required under an IMF-EU bailout of the country as further weakening the eurozone economy.
"The euro remains weak on the back of Draghi's newspaper comments heightening the prospect of the ECB launching QE (stimulus) this month, although the Greek election result could see it delayed until February," Mike van Dulken, head of research at traders Accendo Markets, said on Monday.
The European Central Bank has already used several tools to push inflation in the 19 members of the eurozone back up to the 2.0 percent annual rate it regards as healthy, including asset purchases and making cheap loans available to banks.
It is also currently examining the possibility of large-scale purchases of sovereign debt, so-called "quantitative easing" or "QE", to help jump-start the eurozone economy.