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On the Brink of Insolvency, Greece to Hold Fresh Elections

May 15, 2012 at 12:00 AM EDT

RAY SUAREZ: From France to Greece, Europe’s common currency divides the members of the European Union.

Francois Hollande was met on the steps of Paris’ 18th century Elysee Palace by Nicolas Sarkozy, the man he ousted a week ago in a bitter run-off for the French presidency. After a 40-minute meeting, Hollande strolled into a stateroom to assume office.

Then France’s first socialist president in 17 years outlined the grave challenges ahead.

FRANCOIS HOLLANDE, French president (through translator): I measure today the burden of the constraints that our country is facing, a massive debt, weak growth, a high unemployment rate, a downgraded competitiveness, and a Europe which is struggling to get out of the crisis.

RAY SUAREZ: That crisis, born of crushing debt loads in many eurozone nations, has sent the continent reeling. Seven countries are now officially in recession. Only Germany posted economic growth in the first quarter.

In Paris, Hollande called for a mutual effort to benefit all.

FRANCOIS HOLLANDE (through translator): Europe needs projects. It needs solidarity. It needs growth. To our partners, I will propose a new pact that will combine the necessary reduction of the public debt with the necessary stimulus.

RAY SUAREZ: Soon after, Hollande left for Berlin and a meeting where growth and stimulus were topic-A with German Chancellor Angela Merkel. She backed Sarkozy, endorsing him publicly. The two had joined in pushing the austerity drive in Europe which Hollande and his supporters blame for deepening economic troubles.

Indeed, Merkel’s own party has suffered two defeats in German state elections this month. Today’s meeting was delayed hours by nature. Hollande was forced to return briefly to Paris after his first plane was struck by lightning. Hours later, he appeared with Merkel before cameras, all smiles for now.

Meanwhile, in Greece, there was little reason for pleasantries nine days after voters divided sharply over drastic austerity measures. A total impasse in efforts to form a new government led to a call today for new elections, as early as next month.

Socialist Party leader Evangelos Venizelos lamented the turn of events.

EVANGELOS VENIZELOS, Greek Social Democrat leader (through translator): The country is unfortunately heading again to elections. I am sure that those who did that misrepresented the will and the mandate of the Greek people.

RAY SUAREZ: Austerity moves have sparked widespread outrage in Greece, but European Union creditors led by Germany insist further bailout funds will not be dispersed without cuts that previous Greek governments agreed to.

Now, though, a coalition of left-wing parties stands to gain from another ballot. The leader of that group says Greeks have had enough austerity.

ALEXIS TSIPRAS, Syriza Party leader (through translator): We tried to create a government that would satisfy the minimum demands made by the electorate. Our main demand was to cancel the new harsh measures, cutting pensions and salaries and to restore our labor rights. All they did in these past eight-plus days was to present us with a dilemma, the bailout or elections?

RAY SUAREZ: As the political crisis drags on, Greece is teetering on the edge of insolvency. Its economy contracted at a crushing 6.2 percent rate in the first quarter. That in turn has conjured fears of a Greek exit from the euro common currency, rattling markets worldwide.