Panic spread across Europe today as Greece moved closer to abandoning the euro while the new French President hit out at Germany AND Britain.
Markets plunged amid chaotic attempts in Athens to form a government capable of pushing through swingeing cuts ordered by Germany.
David Cameron will tomorrow add to the sense of alarm – warning the continent is on the brink of meltdown.
He is set to say: “The eurozone remains in extreme trouble and is in recession.”
The remarks come after France’s new Socialist leader Francois Hollande launched an attack on the UK after being elected in Sunday’s poll.
Mr Hollande – who Mr Cameron snubbed during the election campaign while backing his rival Nicolas Sarkozy to win – said Britain did not care about the eurozone and only wanted to protect big-money City financiers.
He signalled that he would push for a financial transaction tax on banks based in London.
He also demanded German Chancellor Angela Merkel re-open the EU “fiscal pact” which forces European governments to cut their spending.
The new President said: “The British have been particularly shy about the issues of financial regulation, and attentive only to the interests of the City. I will meet David Cameron soon.”
Mrs Merkel hinted that the austerity programme was “not up for grabs”.
The remarks will infuriate voters in Greece who rejected austerity in elections over the weekend.
But Antonis Samaras, the leader of the Greek conservative party that gained the most votes in parliamentary elections, today admitted his efforts to form a coalition government with other parties had failed.
The country’s president will now give Alexis Tsipras, the head of the Radical Left Coalition party, the chance to form a government. Mr Tsipras will have three days to seek a coalition and is vehemently anti-austerity.
No agreement could force new elections and the country could leave the single currency.
The chaos in Greece and change of French president sparked huge movement on the foreign markets.
The Athens stock market plunged 6.6% while Paris also slumped, before recovering later in the day.
The euro fell against the pound and dollar as investors dumped the risky currency.
Interest on Mediterranean countries’ debt jumped with Greek 10-year loans reaching 23% – compared to the 1.56% Germany pays.
The head of the International Monetary Fund tonight weighed into Europe’s austerity debate – urging governments to slow down budget cutbacks to avoid further damaging their economies.
Christine Lagarde said: “Some countries under severe market pressure have no choice but to move faster.
“On the whole, however, adjustment should be gradual and steady.”
Her remarks will be leapt upon by Labour leader Ed Miliband as proof that David Cameron is pushing cuts too far and too fast.
Analysis by Nabila Ramdani, French political commentator
A SHARP fall in financial markets worldwide was a natural reaction to the election of France’s first Socialist president in 17 years.
Not only has Francois Hollande styled himself an “enemy of the rich” but he effectively wants to tax the wealthy out of his country by introducing a top rate of 75%.
Britain’s stock market was closed for the Bank Holiday but there are worrying reasons for the UK to fear Hollande’s radical policies.
He has severely criticised the austerity programme of David Cameron and German Chancellor Angela Merkel and wants to boost government spending as a means of solving the euro crisis.
In this, Hollande has numerous allies in Greece where elections saw a huge vote against the bailout package. It suggested growing support for Hollande’s pledge to rip up the current EU treaty.
“Austerity can no longer be the only option,” he has said.