May 15, 2012 at 12:40 PM ET
Attempts to form a government in Greece collapsed on Tuesday, worsening fears that leftists opposed to the terms of a European Union bailout could sweep to victory and push the eurozone crisis into a dangerous new phase.
In Athens, a spokesman for President Karolos Papoulias said his efforts to broker a compromise -- in which a cabinet of technocrats would try to steer the country away from bankruptcy -- had failed, nine days after an inconclusive general election.
A caretaker government will now be formed pending a new vote probably in mid-June.
"For God's sake, let's move towards something better and not something worse," Socialist leader Evangelos Venizelos told reporters after party leaders met the head of state.
The turmoil in Athens rattled markets and sent shock waves around other troubled members of the eurozone, the 17 nations that use the euro currency and the world's largest trading block.
'Bad news' for U.S.?
And with hostility rising in Greece to austerity policies imposed by the European Union and International Monetary Fund, speculation that Greece will exit the eurozone won't go away.
"It is quite uncharted territory -- say your prayers," politics professor and associate fellow at British think tank Chatham House Richard Whitman told msnbc.com. "If the EU is sickly, it's bad news for all its trading partners (such as China and the United States). You can't sort out the world economy without Europe on the mend."
The amount of political energy and effort being spent on sorting out the Greek issue means that policymakers and politicians were simply "muddling through" and not focusing enough attention on the entire trading block's ailing economy, he said.
Then there is the question of contagion, experts warn.
"Is it Portugal, Spain or Italy next? And then the euro itself starts to unravel," Whitman said.
Greece's left-wing SYRIZA party, which surged to second place in last week's election on an anti-austerity platform, rejected all compromise with pro-bailout parties, emboldened by opinion polls showing it could top the poll in a second vote.
The tremors from Greece, compounding worries about Spain's debt-laden banking system, ended any honeymoon for new French President Francois Hollande, thrusting the growing risks to the EU to the top of the agenda for his first meeting with German Chancellor Angela Merkel hours after he took office.
In his inaugural address, the Socialist president called for a European pact to revive growth and temper German-driven austerity measures, seeking to change the direction of eurozone economic policy.
"I will propose to our partners a pact that will tie the necessary reduction of our public debt to the indispensable stimulation of our economies," Hollande declared, saying Europe needed "projects, solidarity and growth."
Msnbc.com's F. Brinley Bruton and Reuters contributed to this report.