Euro hits 4 month low on heightened Greek fear

The euro has hit a fresh four-month low against the dollar as political uncertainty in Greece fuels speculation the country could be forced to leave the single currency. The euro fell more than a half a cent to $1.27. Against the pound, the euro slipped slightly to 79.6 pence. The eurozone crisis also pushed Asian stocks lower and knocked oil prices. On Tuesday, Greek politicians failed to form a coalition, meaning the country will go the polls again next month. In elections earlier this month, the majority of Greeks voted against those parties backing drastic austerity measures agreed with the EU. Analysts and some politicians are now openly discussing the possibility of Greece leaving the euro. Uncertainty about the future of the euro has hit world stock markets this week, and Asian shares fell further on Wednesday. Tokyo's Nikkei index dropped 1%, while Hong Kong's Hang Seng and South Korea's Kospi lost about 3%. The oil price also fell. London Brent fell by $1.25 a barrel to $111, while US light crude fell $1.60 to $92.38. Different views There are concerns that if Greece sets a precedent by leaving the euro, other countries may follow suit. As a result, the interest rate, or yield, on Spanish government bonds traded on the secondary market rose to 6.44% from 6.32%, while those in Italian bonds rose to almost 6%. This indicates investors are becoming increasingly nervous about the ability of these countries to repay their debts. Austerity measures introduced across Europe are designed to reduce debt levels that have risen significantly since in the financial crisis of 2008. However, as anaemic growth and high unemployment grip the eurozone, an increasing number of commentators and politicians are questioning whether austerity alone is the best way out of the crisis. Leading the calls to focus on growth is new French President Francois Hollande. He held talks with German Chancellor Angela Merkel, who insists that austerity is the best way to cut debt levels, on Tuesday evening. Despite their differences of opinion, the two leaders vowed to work together to resolve the crisis.