Debt-stricken Greece forced to hold second election

Debt-stricken Greece on Wednesday faced the prospect of a second election in less than two months after failing to form a government, stoking the eurozone crisis even as France and Germany pledged support and perhaps help for growth. The election, expected on June 17, follows an inconclusive poll on May 6 when a majority of Greeks voted for parties opposing the austerity measures which Athens agreed to in return for a massive EU-IMF bailout late last year. However, there is no guarantee that the new vote will produce a viable government -- the main opponent of the EU-IMF deal is tipped to win -- which means even more uncertainty over Greece's future in the single currency club. That was enough to send global financial markets into a tailspin as investors looked for a safe haven for their money, dumping stocks and the euro. Markets were down again Wednesday, finding no comfort in a "we want Greece to stay in the euro" pledge by German Chancellor Angela Merkel made alongside new French President Francois Hollande. Merkel said the two European powerhouses were also prepared "to study the possibility of additional growth measures in Greece" if Athens sought them. But on Wednesday German Finance Minister Wolfgang Schaeuble insisted once again that it was not possible to re-negotiate the EU-IMF deal. "This is an aid programme that was prepared down to the last detail, we cannot re-negotiate it," Schaeuble told Deutschlandfunk radio. A further sign of nerves came with news that about 700 million euros ($894 million) had been withdrawn from Greek banks on Monday. President Carolos Papoulias said the central bank governor had told him that the banks' "situation was very difficult ... and that the banking system was currently very weak." The governor "said there was nothing to panic about but that there were a lot of fears that could turn into panic," Papoulias added in a statement late Tuesday. The centre-left daily Ethnos wrote that Greece was heading for "elections in a minefield. The result will determine the country's future in the eurozone." The euro tumbled Wednesday to $1.2693, its lowest level since January 16. "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. "In Greece, there are increasing outflows from its own banking sector and broader discussion of contagion effects," it said. President Papoulias is due to meet party leaders at 1000 GMT Wednesday to set up a caretaker administration, with the date for the new polls yet to be officially announced. "We are going again towards elections ... under very bad conditions," Pasok party leader Evangelos Venizelos said Tuesday after last-ditch talks failed to form a coalition. "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. International Monetary Fund head Christine Lagarde on Tuesday raised the possibility that Greece could leave the eurozone, albeit in an orderly fashion. "It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider," Lagarde said. Greece has "undertaken important reforms, they have made a certain number of sacrifices ... To throw all of this away because of profound political disagreements, it's really a shame for the Greek people." Papoulias had called Tuesday's meeting to discuss, in the absence of any other solution, a government of "distinguished and non-political figures" which would defuse the impasse over the EU-IMF austerity measures. Figures Tuesday showing the Greek economy slumped a massive 6.2 percent in the first quarter compared with a year earlier, fuelling the argument that the austerity policy is simply not working and the emphasis must turn to growth.