Euro falls to four month low amid market jitters at French and Greek elections The euro fell its lowest level for almost four months to $1.2954 before showing signs of a rally to $1.301 while the interest rate on France's benchmark ten year bonds rose. Traders said there was no panic but the rising yield is increasing concerns about a run on French debt and a threat to the French deficit reduction programme. A widening in the spread between French and German bonds was seen as a "flight to safety." Germany's 10-year yield fell to as low as 1.552pc, the second record in consecutive trading days. Ratings agency Standard and Poor's said President Hollande's victory would have no immediate effect on its French rating. The agency infuriated former President Sarkozy when it stripped France of its top triple-A rating in January. A number of analysts felt markets had already taken account of a Hollande victory while others argued that a combination of the French and Greek results would increase pressure on eurozone debt. World stock markets hit as France votes for first Socialist president in 20 years and Greece chooses a parliament with a majority of MPs from anti-bailout parties. Japan's Nikkei 225 index plunged 2.8 per cent to close at 9,119.14 - its lowest finish in three months - while Dow Jones industrial futures fell 0.8 per cent to 12,857 and S&P 500 futures lost 0.9 per cent to 1,350.90. Britain's markets are closed for the Bank Holiday. No political party won enough votes to form a government, raising the possibility of new elections within months and protracted uncertainty for global markets. Hollande became the first Socialist French President for over 20 years on Sunday night and the moment of his victory over Sarkozy to declare a fight back against Germany's austerity policies. On the same day in Greece, neo-Nazis entered the country's parliament after national elections that wiped out mainstream parties that had supported austerity measures imposed by the EU. Accepting his mandate as French president, Mr Hollande threw down the gauntlet to Angela Merkel, the German chancellor, who has made austerity policies a condition of euro membership. Europe is watching us. The moment that I was announced president, I am sure in many European countries there was a relief, hope at the idea that at last austerity is no longer inevitable, and my mission is to give to European construction the dream of growth," he said. Europe is watching us, austerity can no longer be the only option. His words, just after inflicting a humiliating defeat on Mr Sarkozy, previously the Chancellor's closest ally, are a call to arms against the economic policies that Germany has enshrined in a eurozone "fiskalpakt" treaty. Mrs Merkel was quick to call and congratulate Mr Hollande, inviting him to Berlin "as soon as possible" for talks. "It is a thunderclap for Europe," said Arnaud Montebourg, a senior Socialist likely to enter the Cabinet. This shows that the Europe of austerity must be turned into a Europe of growth. Ed Miliband, the leader of the Labour Party, also hailed the French Socialist victory as a development that would weaken the Conservative-led coalition. And it matters to Britain," he said. But Germany says it will not renegotiate Europe's fiscal compact on budget discipline and rejects measures to foster growth that would push up debt levels. "From our point of view a new negotiation of the fiscal compact is not possible," Chancellor Angela Merkel's spokesman Steffen Seibert said during a regular news conference. He added: "We don't want growth through new debt, rather we want growth through structural reforms." Greek elections have also delivered a hammer blow to the eurozone's austerity policies after over 60 per cent of the vote went to far-Left and Right-wing parties opposed austerity measures that are a condition of an EU-IMF bail-out and Greek membership of the euro. In Greece, it appeared last night that centrist New Democracy and Socialists were denied a combined majority leaving the country ungovernable as a minority government tries and pass a new raft of austerity measures. The latest crisis could cause the collapse of a €105 billion (£90 billion) EU-IMF bail-out deal, meaning that Greece would have to leave the euro. Neo-Nazi Golden Dawn MPs will now enter the Greek parliament for the first time since the end of the military dictatorship in 1974. The combination of both results was expected to upset markets and increase pressure on the euro as investors today get their first chance to react to the prospect of uncertainty. The early signs were ominous as the Asian markets registered an immediate drop in the euro when they opened this morning. In a bad night for Mrs Merkel, her ruling Christian Democrat party suffered a major setback in regional elections, scraping a one-point lead over resurgent Social Democrats allied to Mr Hollande. The anti-austerity movement across Europe is a huge challenge to Germany and its economic doctrine of austerity that until last night has ruled supreme with the support all of Europe's leaders, the EU, European Central Bank and financial markets. After the French and Greek votes that consensus has been shattered at a time when Europe's economies are plunging further into recession, leaving little room to manoeuvre for governments. Mr Sarkozy became the 11th European leader to fall foul of the economic crisis since 2008 in a catastrophic result for the French Right. He was ousted from the Elysée after just one term in the worst setback for the centre-Right for over 30 years and lost crucial votes to the National Front. On Sunday night Mr Hollande had won 51.56 per cent of the vote compared to Mr Sarkozy's 48.41 per cent with 90 per cent of the ballots counted. Over 100,000 jubilant supporters gathered at Paris's revolutionary Place de la Bastille, a pilgrimage site for the Left, chanting "François President." There are concerns that Mr Hollande will be unable to respect fiscal discipline targets while enacting a tax - and-spend programme that would see him create 60,000 more state education posts, partly revoke a pension reform and slap a 75 per cent tax on millionaire owners. David Cameron, the Prime Minister who had given his backing to Mr Sarkozy, called Mr Hollande to congratulate him on his victory. "They both look forward to working very closely together in the future," said a Downing Street spokesman.