Greece woes roil Asian markets

Asian markets yesterday fell and the euro dipped to a new four-month low on news Greece will go to the polls again after talks to form a coalition failed, stoking fears it will exit the Eurozone. The developments came as France's new pro-growth President Francois Hollande held his first talks with German Chancellor Angela Merkel, the main proponent of austerity, to find common ground on tackling the crisis. Tokyo fell 1.12 per cent, or 99.57 points, at 8,801.17 while Sydney was 2.36 per cent lower, or 100.8 points, at 4,165.5 and Seoul closed 3.08 per cent lower, easing 58.43 points to 1,840.53. Hong Kong slumped 3.19 per cent, or 634.48 points, to 19,259.83 and Shanghai was down 1.21 per cent, or 28.65 points, at 2,346.19. Greece must hold fresh elections after talks on forming a new government broke up without agreement on Tuesday, prolonging a tortuous crisis. The new polls, expected on June 17, follow an inconclusive election on May 6 when a majority of Greeks voted against harsh austerity measures Athens took on in return for a huge European Union-International Monetary Fund bailout. "We are going again towards elections... under very bad conditions," Pasok party leader Evangelos Venizelos said after the last-ditch talks failed. "The Greek people must now make the right decisions for the good of the country," stressed Venizelos, who supported the EU-IMF deal in a technocrat government formed last November. In the meantime the country will be run by a caretaker administration. Most polls indicate a new vote will see anti-austerity parties improve on their surprising performance in this month's polls, when 70 per cent of the electorate voted against the swingeing cuts. Such an outcome would likely see the bailout deal ripped up and Greece default on its debt obligations before eventually exiting the Eurozone. The precarious financial situation was also highlighted when President Carolos Papoulias said about €700 million (Dh3.2 billion) had been withdrawn from Greek banks on Monday and warned the situation could worsen in coming days. Adding to the pessimism were comments from German Finance Minister Wolfgang Schaeuble who said it was not possible to re-negotiate an international aid plan for Greece. "This is an aid programme that was prepared down to the last detail, we cannot re-negotiate it," he told Deutschlandfunk radio. Currency traders reacted badly, sending the euro tumbling to $1.2686 (Dh4.65), its lowest level since January 16, compared with $1.2728 in New York late on Tuesday as they jumped out of risky assets. The common currency also eased to a three-month-low 101.96 yen, against 102.12 yen, while the dollar was changing hands at 80.40 yen, from 80.37 yen. "There is a pervading sense of unease in financial markets, a disquieting feeling of having been in something like this position before and wondering if it might turn out the same," National Australia Bank said in a note yesterday. "In Greece, there are increasing outflows from its own banking sector and broader discussion of contagion effects," it said. "The concern now is regarding contagion. It's not Greece per se that is the problem, but the credibility of the euro as a currency."