German Chancellor Angela Merkel and French President Francois Hollande said they would consider measures to spur economic growth in Greece as long as voters there committed to the austerity demanded to stay in the euro.

Requests for measures to bolster growth will be “considered” and the European Union may also “approach Greece with proposals,” Merkel said late yesterday at a joint press conference with Hollande during his first official visit to Berlin. “Greece can stay in the euro area,” and “Greek citizens will be voting on exactly that.”

Their encounter, the first meeting between the chiefs of Europe's two biggest economies, came after Greece announced a return to the ballot box following the collapse of talks on forming a government. The euro and stocks fell as investors speculated that Greece may drop out of the single currency more than two years after its budget-deficit blowout triggered a financial crisis across Europe that continues to rage.

Hollande saw Merkel less than 12 hours after being sworn in as president and an arrival that was delayed by a lighting strike on his plane from Paris. With Greece in its fifth year of recession, the French Socialist returned to a theme he pressed throughout his election campaign, saying policy makers must offer the prospect of something more than austerity.

“I'll respect the vote of the Greeks whatever it is,” Hollande said. “Yet my responsibility is to give Greece a signal. I see the suffering and challenges that the Greeks feel. The Greeks need to know we'll come with growth measures that will allow them to stay in the euro zone.”

With the debt crisis now in a third year, the leaders made a show of German-French unity after months of trading barbs on crisis policy. Merkel publicly backed Nicolas Sarkozy for a second term, while Hollande criticized her exclusive focus on deficit cutting.

They found common cause after the collapse of talks in Athens on forming a government stirred speculation that anti-bailout parties would make further gains and tear up the terms of Greece's 240 billion euros ($305 billion) of aid.

Banks dragged the Stoxx Europe 600 Index to its lowest level since December. The euro fell as much as 0.4 percent to $1.2681, the lowest level since January, as the prospect of new Greek elections prompted renewed speculation of a euro exit and potential contagion that would wreak untold damage to Europe's financial system.

Greek 'Challenges'

Merkel said there was an agreed bailout program between Greece and its creditors that “has to be adhered to.” At the same time, she said she had called New Democracy leader Antonis Samaras, who won the May 6 vote, and caretaker Prime Minister Lucas Papademos to say “that we are prepared to help Greece overcome its structural challenges, to help with growth.”

She said that there were differences in emphasis on growth with Hollande. Growth will feature in talks among euro leaders on May 23 and again at a summit at the end of June, she said.

The French president, who has called for Europe's German-inspired budget treaty to be renegotiated, said that he wanted “growth aspects to be real and translatable into reality.” At the June summit, “everything needs to be put on the table,” including investment spending and joint euro-area bonds, he said. Merkel rejects euro bonds.

Greece may trigger a crisis “where you're really going to find differences that matter” between Merkel and Hollande, Irwin Collier, a political scientist at the Free University in Berlin, said on Bloomberg TV's “The Pulse” with Francine Lacqua. “The next couple of months are going to be very tentative for the relationship.”

Hollande's arrival in Berlin came at the second attempt after his plane was struck by lightning, forcing him to turn back and board a second aircraft.

Merkel said she was “very glad” that Hollande came to Germany the day of his inauguration. “We are even more glad because he did this despite the lightning strike. Maybe this is good omen for cooperation.”

Bild, Germany's most-read newspaper, underscored the domestic challenges Merkel faces over Greece, saying in an editorial today that the inability to form a government “makes it clear once and for all: the Greeks are saying good-bye to the euro.”

Europe requires “clear rules” on debt limits and economic data, Bild said. “Whoever swears allegiance to those rules is allowed in. Everyone has to observe a euro stop sign. Not just the Greeks. When that's clear to everyone after this crisis, Europe will be fit for the future again.”

Bloomberg News

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Merkel, Hollande Open to Stimulus

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