Greece to hold new elections after stalemate

The announcement comes as the Greek debt crisis threatens the stability of the European Union’s single currency.

Greece has been in a political deadlock since elections nine days ago left no party with a majority. The leaders of three different parties have tried to cobble together a workable coalition, but all have failed.

Markets across Europe fell slightly on the news of political talks breaking up on Tuesday. The news came shortly before American markets opened for Tuesday trading.

The political instability has raised the possibility that Greece will fail to make debt payments as early as next month, potentially forcing the country out of the euro, the currency used by 17 European Union countries.

What if Greece exits the eurozone?

The European Central Bank and International Monetary Fund have been pumping money into Greece to keep that from happening, but they have demanded that the Greek government slash spending to get the funds.

Angry voters punished the politicians who imposed the austerity measures when they went to the polls on May 6, greatly reducing the number of seats held by the center-right New Democracy party and the Socialist PASOK party.

Markets have kept a nervous eye on Greece since the elections.

“If no government is in place before June when the next installment (of loan money) from the European Union and International Monetary Fund is due, we estimate that Greece will run out of money sometime between the end of June and beginning of July, at which point a return to the drachma would seem inevitable,” Bank of America/Merrill Lynch wrote in a report released Friday.

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