Hollande's push for European bonds turned down

LONDON: Francoise Hollande, known as Mr Normal, is the new gamechanger in Europe. Apparently, the Greeks look up to him as a saviour from the Merkozy era of enforced austerity. On Wednesday night's much-touted European leaders summit, the outcome was, as expected, fractured. Hollande pushed for joint European bonds - debt guaranteed by the entire Eurozone, read Germany - which Angela Merkel flatly turned down.

The election of Hollande, and his emphasis on growth and stimulus, is now gaining momentum across Europe, with only countries like Finland and Netherlands on the German side.

British Prime Minister David Cameron opposed a proposed financial transaction tax, but the key issue facing the Eurozone today - stabilising its banking system, with runs on banks in Greece and Spain - did not achieve much momentum. While Eruopean leaders warned the Greek electorate that it cannot stay in the Euro without meeting its Brussels-imposed budgets, Greece's angry young man, socialist Alexis Tsipras, took his message to France and Germany, where he addressed media conferences saying he's willing to play chicken for ever.

Tsipras is the frontrunner to win the Greek elections on 17 June. News that German chancellor Angela Merkel had advised the caretaker Greek president to hold a referendum on whether Greece wants to be in the Euro along with the elections created a further rift between Athens and Frankfurt.

"Given the extent of the decline in all the major business confidence indicators, we suspect the ECB will have to review its policy mix as early as June. Lower rates and the resumption of non-standard measures would avoid another major collapse in confidence," said independent thinktank Newedge strategy.

The Eurozone headed into uncharted territory on Thursday, with initial PMI Markit data showing that the slowdown in the EMU region is deeper and more severe than expected, with the manufacturing index down 1.2 per cent, and the services index also down. UK's office of national statistics downgraded its data for the first quarter, showing the UK economy shrank by 0.3 per cent, more than initially estimated, cemented the double dip recession. More significantly, a key German business confidence index - IFO survey for May - dropped 3 per cent, the first time in 10 months, an indicator that the German economy, which has so far shrugged off the Eurozone crisis, is facing stiff headwinds.

Petr Zemcik, chief european economist at Moody's Analytics, said "German GDP growth is expected to slow in coming quarters as foreign demand and industrial sector weaken due to the again-escalating sovereign debt crisis. We anticipate a deterioration of business confidence in the long run."

News that the EU had asked its member states to prepare contingency plans for a Grexit created further panic in markets.