Bank chief King warns eurozone ‘is tearing itself apart’

quantitative easing measures later this year.

Sir Mervyn warned that even with a “credible and effective” response from eurozone leaders, a prolonged period of sluggish growth and heightened uncertainty was still likely for the region.

He said: “We are navigating through turbulent waters, with the risk of a storm heading our way from the continent. We don’t know when the storm clouds will move away.”

London’s leading shares index fell to its lowest point since December as fears that Greece will crash out of the eurozone continued to plague world markets.

The FTSE 100 Index was down 32.4 points at 5405.3 as investors continued to fret that another election in Greece next month will see anti-austerity parties emerge victorious.

That could lead to the country being denied further EU bailout money, defaulting on its debts and being ejected from the single currency.

The country could be denied further EU bailout funds if a party opposing necessary austerity measures comes to power, which could in turn lead to Greece exiting the euro.

The troubles in Greece came after the newly-installed French president, Francois Hollande, was in Berlin arguing that the German-led austerity strategy was too rigid and must be balanced with effective growth initiatives.

Meanwhile a senior judge has been sworn in to head Greece’s caretaker government for a month as it continues to lurch through a political crisis.

Council of State head Panagiotis Pikrammenos, 67, was appointed to head a government that will lack the mandate to make any binding commitments until a new election, which is expected on June 17.

About E700m (£559m) in deposits have left Greek banks since May 7, the day after the election.

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