Euro zone stock markets plunged on Monday on signs that painfully crafted political plans to nurse euro zone member states back to fiscal health were being undone by a political backlash against the attendant austerity.

These included Sunday’s defeat for the incumbent in the first round of the French presidential election and Saturday’s collapse of the Dutch government.

Equity markets were battered further by a disappointing survey of the euro zone economy. This added to recent evidence that the fragile recovery, which had appeared to follow the incomplete political and economic resolution of the euro zone crisis at the end of last year may have been illusory.

The provisional monthly Purchasing Managers' Index (PMI) survey by Markit Economics suggested that euro zone output declined in April at its fastest pace in five months — prompting companies to cut their workforces with the greatest severity in two years.

Responding to the political news, Jim Reid, head of global fundamental credit strategy at Deutsche Bank in London, said: “All year we’ve been of the opinion that problems with austerity would be the reason this sovereign crisis would reignite as we approached the second half. The French and Dutch are now political headaches for Europe.”

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