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The crushing defeat follows elections that rejected austerity policies in Greece, France and Italy, severely weakening Chancellor Merkel's hand at her first talks with FranCois Hollande, the new French President, in Berlin tomorrow (TUES).

Prime Minister Mariano Rajoy on Sunday defended his government's harsh austerity measures aimed at correcting Spain's grim economic forecast, one day after tens of thousands of Spaniards took to the streets in protest of his handling of the country's worst crisis in decades.

Talks to broker a coalition government lead to insults and accusations. Europe is watching nervously, fearing the political chaos could threaten the euro.

Students are protesting on Barcelona's elegant boulevards, public-sector wages are being cut for the second time in three years and resentment is growing against the central government and beneficiaries of bank bailouts.

Spain's government tried to plug a gaping hole in the country's banking system on Friday, but the fourth such attempt to tackle the fallout of a property crash fell short of expectations.

Let Greece go: It's a possibility that's being considered more and more publicly in Europe. There have been two and a half years of bailouts, on top of broken promises by Greece to reform. The result: a fifth year of recession and, this week, political chaos. Voters on Sunday favored parties that either oppose the terms of the country's international bailout or want to renegotiate them. If it cannot get more rescue loans, Greece will go bankrupt and likely have to leave the eurozone, the currency union of 17 countries.

The leaders of Greece's once-dominant political parties made a last push on Friday to avert a new election, which a poll showed would give victory to a radical leftist and doom an EU bailout.

David Cameron signed off messages to tabloid editor Rebekah Brooks with an affectionate "LOL", she told an inquiry on Friday, conjuring the embarrassing image of a British prime minister-in-waiting fawning over a Rupert Murdoch protégée.

Francois Hollande, the Socialist "Mr Normal" who will be sworn in as French president next week, says he is worth almost 1.2 million euros ($1.5 million), considerably less than his predecessor Nicolas Sarkozy.

The anti-austerity backlash - as seen at the polls in France and Greece - is already shaping a new debate in Europe... Europe's leaders will address a conundrum that divides economists: can you have austerity and growth at the same time?