The prospect of a second Greek election in less than two months stoked the eurozone crisis Wednesday even as France and Germany pledged support and help for growth.
News that about 700 million euros ($894 million) had been withdrawn from Greek banks on Monday added to the strains showing up across European markets, with investors fearful that a Greek euro exit would be chaotic for everyone.
In a statement late Tuesday, President Carolos Papoulias said the central bank governor had told him that the banks' "situation was very difficult ... and that the banking system was currently very weak."
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The governor "said there was nothing to panic about but that there were a lot of fears that could turn into panic," Papoulias added.
Christian Schulz of Berenberg Bank said the withdrawals "suggest that they are getting increasingly worried about the country's future in the euro."
On their own they "do not indicate panic quite yet. However, this could change soon, so that the central bank would have to step in to save the banks," Schulz said.
The centre-left daily Ethnos wrote that Greece was heading for "elections in a minefield. The result will determine the country's future in the eurozone."
Ta Nea, which supports the Pasok Socialist party, said Greece was going into the polls "surrounded by uncertainty and fear over the economic collapse of the country."
The election, expected on June 17, follows an inconclusive poll on May 6 when a majority of Greeks voted for parties opposing the austerity measures which Athens agreed to in return for a massive EU-IMF bailout late last year.
However, there is no guarantee that the new vote will produce a viable government -- Syriza, the main opponent of the EU-IMF deal is tipped to win -- which means more uncertainty over Greece's future in the single currency club.
Markets were down again Wednesday, finding no comfort in a "we want Greece to stay in the euro" pledge by German Chancellor Angela Merkel made alongside new French President Francois Hollande.
Merkel said the two European powerhouses were also prepared "to study the possibility of additional growth measures in Greece" if Athens sought them.
But on Wednesday German Finance Minister Wolfgang Schaeuble insisted once again that it was not possible to re-negotiate the EU-IMF deal.
"This is an aid programme that was prepared down to the last detail, we cannot re-negotiate it," Schaeuble told Deutschlandfunk radio.
"Greece must be ready to accept the (EU-IMF) aid ... Those who win the elections will have to decide if they accept the conditions or not," he added.
The euro tumbled Wednesday to $1.2693, its lowest level since January 16.
"There is a pervading sense of unease in financial markets, a disquieting feeling of having been in something like this position before and wondering if it might turn out the same," National Australia Bank said in a note.
"In Greece, there are increasing outflows from its own banking sector and broader discussion of contagion effects," it said.
"The concern now is regarding contagion. It's not Greece per se that is the problem but the credibility of the euro as a currency," the bank said.
That contagion effect was showing up most strongly in Spain, struggling to stabilise its banking sector and get its economy growing again, where government borrowing costs were rising sharply.
The yield or rate of return on 10-year Spanish government bonds jumped to 6.495 percent, well above the 6.0 percent level widely considered to be unsustainable in the long term.
Papoulias was due to meet party leaders at 1000 GMT Wednesday to set up a caretaker administration, with the date for the new polls yet to be officially announced.
International Monetary Fund head Christine Lagarde on Tuesday raised the possibility that Greece could leave the eurozone, albeit in an orderly fashion.
"It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider," she said.
Greece has "undertaken important reforms, they have made a certain number of sacrifices ... To throw all of this away because of profound political disagreements, it's really a shame for the Greek people."
