European stocks have opened lower and the euro hit an eight-day low against sterling as a governing crisis in Germany weighed on markets. As David Pollard reports, it followed comments from German chancellor Angela Merkel saying she would prefer fresh elections to ruling with a minority government after talks on forming a three-way coalition collapsed.
For 'Germany', read 'stability' .... Only not right now - when unaccustomed political deadlock continues to niggle at Europe's biggest economy, and investors in it. (SOUNDBITE) (German) HEAD OF CAPITAL MARKETS ANALYSIS AT BAADER BANK, ROBERT HALVER, SAYING: We are the benchmark world-wide for political stability. But we have now reached a reality already present in some European countries. The Spanish have a minority government, the British do not have a stable government ... A possible new reality that could unnerve markets - if for now they show signs of resilience. German and European stocks opened lower - but then inched up. The single currency has steadied .... And the gap between French and German bond yields tightened - a sign that bond markets are shrugging off the risks. SOUNDBITE (English) IG SENIOR ANALYST, CHRIS BEAUCHAMP, SAYING: I think it would be too early to write off Merkel and to assume automatically that she won't be chancellor in a few short months time. But politicians may now focus on three weeks' time. After the collapse of coalition talks, that is now the deadline mooted for parties to find a new formula. Or, as the German chancellor has indicated, face the possibility of new elections .... With the risks that would entail. SOUNDBITE (English) CMC MARKETS, MARKET ANALYST, DAVID MADDEN, SAYING: Germany and an EU and eurozone without Angela Merkel would kind of ruffle some feathers and knock some confidence in the region. Germany's impasse a 'test' according to Wolfgang Schaeuble, not a constitutional crisis. But the former finance minister also making an appeal: Germany has to act, he said, to solve its problems, as a reliable partner to Europe.