Asian and Pacific market indexes fell 1.5 percent to more than 3 percent, with European market indexes forecast to follow suit, after IMF Managing Director Christine Lagarde said Europe should prepare for the possibility of a Greek departure from the single currency.
"The spillover effects -- the chain of consequences -- that could result from that [Greek euro exit] are very difficult to assess," she told TV news channel France 24. "We can certainly assume that it would be quite messy."
A Greek withdrawal "would be extremely expensive," she added, "and would pose great risks, but it is part of options that we must technically consider."
Germany's WirtschaftsWoche business weekly magazine forecast a Greek bankruptcy and euro exit would cost the eurozone's 16 remaining countries at least $384 billion, pushing the economic and monetary union and broader European economy into a 1930s Depression-era crisis.
Greek President Karolos Papoulias announced Tuesday a fresh general election would be held next month after Greece's political parties failed to form a national unity government because of opposition from the anti-bailout SYRIZA coalition.
A caretaker government was to be chosen Wednesday to oversee the election, widely expected to be held June 17.
"The extension of political instability will lead to fatal consequences," Papoulias was quoted in the British newspaper The Daily Telegraph as saying. "The absence of government is a serious risk to the financial security of the Greek people and our national existence."
Several Athens bankers voiced concern Tuesday about a sustained outflow of deposits of more than $7 billion since the inconclusive May 6 general election.
German Finance Minister Wolfgang Schauble warned Greek voters the "wrong" result in next month's election -- one that does not honor Greece's bailout terms -- would force their country out of the single currency.
Alexis Tsipras, president of the Synaspismos political party and head of the Coalition of the Radical Left parliamentary group, known as SYRIZA -- which became Greece's second-biggest party in the May 6 election and is the top party in opinion polls ahead of the follow-up vote -- accused the pro-euro politicians of trying to blackmail Greek voters into supporting further austerity measures.
He said his party would "not betray the hopes and expectations of voters who rejected the bailout."
About 70 percent of votes cast May 6 went to anti-austerity parties.
But almost 54 percent of adults surveyed after the election said Greece should continue to carry out reforms mandated by the IMF, European Union and European Central Bank to stay in the euro.
Thirty-eight percent said they would reject the program even if it meant immediate bankruptcy, said the poll of 1,002 people, conducted Thursday and Friday by Rass SA and published Monday in the Eleftheros Typos newspaper. No margin of error was given.
Merkel called next month's election a vote on whether Greece would remain in the economic and monetary union.
Remaining means fulfilling Greece's IMF-EU-ECB financial commitments, she told reporters in a joint news conference with Hollande. But she added, "We will also give proposals to Greece to encourage growth."
Hollande, who met with Merkel in Berlin hours after being inaugurated in Paris, said, "I hope that we can say to the Greeks that Europe is ready to add measures to help growth and support economic activity so that there is a return to growth in Greece."
He insisted "everything must be put on the table" to help create economic growth in Europe.
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