Shares tumble as Greece remains leaderless

Another day of turmoil on world markets saw the FTSE 100 Index close 2 per cent, or 110 points, lower at 5465.5 as attempts to form a coalition government in Greece continued to stutter.

The ongoing stalemate in the country has left it facing the prospect of another election next month, putting its future in the eurozone in increasing doubt.

The uncertainty hit banking shares yesterday, with Royal Bank of Scotland, Barclays and Lloyds Banking Group among the biggest fallers.

Germany’s Dax and France’s Cac-40 were both down about 2 per cent.

Greece’s President is to hold a broader meeting with the heads of several political parties today in a final push to find agreement on forming a government.

The conservative New Democracy party won the May 6 election, but the poll failed to produce an outright winner. Alexis Tsipras, leader of the second-placed, left-wing Syriza party, has refused to join a coalition, demanding the terms of an international bailout be scrapped or radically renegotiated.

If no agreement can be reached, new elections must be called for next month. A new poll could see anti-austerity parties gaining more support and prompt a rift in 17-nation eurozone and raise the risk of a Greek exit from the shared currency.

Eurozone Finance Ministers meeting in Brussels yesterday had one eye on Athens and the European Commission warned any Greek administration will have to honour the austerity policy agreed as part of multibillion-pound EU-IMF bail-out packages to keep Greece afloat.

A European Commission spokesman said: “Nothing has changed in our position – we want Greece to stay in the euro, we think the Greek (austerity) programme is the best course for Greece and, while we respect the on-going efforts in Greece (to form a government), we say that Greece must honour its (austerity) commitments.”

The Spanish government, now struggling with its own economic crisis, urged Greek politicians to resolve their differences and stick to the austerity path to avoid further economic “contagion”.

The Brussels talks are not expected to reach decisions, but the 17 eurozone Finance Ministers will be joined today by UK Chancellor George Osborne and other non-eurozone Ministers to assess the situation.