Fragile euro is hammered by election fears

THE fragile euro was hammered after the European Central Bank promised to flood the region’s crisis-torn economy with more emergency cash – possibly for years to come.

The central bank has already pumped £1.2trillion of freshly printed money into the financial system in a bid to stimulate growth, but the programme was due to end in March.

Warning of a year of ‘big uncertainty’ ahead for the eurozone as voters go to the polls in Germany, France and the Netherlands, ECB president Mario Draghi extended the scheme to the end of 2017.

Draghi said the amount of cash the central bank will pump into the economy each month will fall from £68bn to £50bn from April.

But in a sign that money printing could on for years, the Italian added: ‘It is, to an extent, open-ended.’

The euro fell by as much as 2.5pc against the dollar from a high for the day of $1.0872 to below $1.06.

It was also on the back foot against the pound, with sterling jumping more than 1.6pc from €1.1670 to €1.1863. The troubled eurozone grew by just 0.3pc in the third quarter of the year, compared with growth of 0.5pc in Britain where the economy continues to flourish following the Brexit vote.

At 9.8pc, unemployment in the single currency bloc is more than twice as high as in Britain, with nearly a quarter of Greeks and a fifth of Spaniards out of work.

Europe is now braced for more political upheaval following the Brexit vote in June and last weekend’s constitutional referendum in Italy where Prime Minister Matteo Renzi suffered a crushing defeat and resigned.

Renzi’s departure could pave the way for elections in Italy – and a possible victory for the Five Star Movement, whose leader, the comedian Beppe Grillo, wants to withdraw Italy from the eurozone.

Draghi warned: ‘There is a big uncertainty, much of which is political, and whether we can do something about that is an open question.

‘I think what the central banks can do is keep a steady hand.’

Although the euro fell, European stock markets surged higher on the promise of more cheap money.

Chris Beauchamp, chief market analyst at IG, said: ‘Mario Draghi has delivered an early Christmas present for European investors. He might have cut the amount of alcohol in the punch bowl, but the punch will be served for longer.’

The stock market in Madrid was up 2pc while Frankfurt gained 1.8pc, Milan 1.6pc and Paris 0.9pc.