“Greece’s troubles will worsen if the job of forming a new government drags out and forces another round of elections,” said Craig Erlam, an analyst at Alpari. Erlam warned that Greece could run out of money in June without a government to negotiate the next tranche of its financial bailout.

And if Greece can’t stay solvent, it risks falling out of the eurozone, with potential knock-on effects throughout the global economy.

With that backdrop European shares have struggled, failing to sustain a recovery in the prior session. Britain’s FTSE 100 fell 0.2 percent to 5,642. Germany’s DAX slipped 0.9 percent to 6,512 and France’s CAC-40 dropped 1.8 percent to 3,157.

Futures pointed to losses on Wall Street. Dow futures fell 0.5 percent to 12,899 and S&P 500 futures dropped 0.5 percent to 1,359.

Markets were thrown into a tailspin Monday after weekend elections in France and Greece led to a sharp shift in the political landscape with the focus shifting away from austerity. In France, President Nicolas Sarkozy was thrown out of office by voters opposed to his belt-tightening program and replaced by Socialist Francois Hollande, who wants growth to become a more central plank of Europe’s debt crisis resolution.

“Although the French election result has now been deemed to not be a threat, Greece remains a significant concern and is likely to be a source of volatility through the week,” said Stan Shamu of IG Markets in Melbourne.

In Greece, voters punished the two parties that have overseen the country’s harsh austerity measures and left no party with enough votes to form a government.

Earlier, Asian shares posted modest gains. Japan’s Nikkei 225 index edged up 0.7 percent to close at 9,181.65, a day after closing at its lowest level in three months.

In other Asian markets, South Korea’s Kospi added 0.5 percent to 1,967.01. Australia’s S&P/ASX 200 rose 0.3 percent to 4,314.30.

Benchmark oil for June delivery was down 89 cents to $97.05 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 55 cents to settle at $97.94 in New York on Monday.

In currencies, the euro fell to $1.3009 from $1.3050 late Monday in New York. The dollar fell to 79.81 yen from 79.94 yen.

____

Pamela Sampson in Bangkok contributed.

The government said the measures, which were sought by the European Union, would encourage growth, create stable jobs and help businesses become more competitive.

A measure in the reforms that makes it easier to fire workers created the most serious challenge Monti has faced. He previously passed austerity measures — mostly tax hikes — and a package of measures to liberalize the market.

Italy’s largest major trade union confederation has pledged 16 hours of general strikes and demonstrations against the measures, while politicians with ties to unions say they would also seek changes to the plan as it goes through parliament.

Monti pledged to monitor for abuses, but insisted that a decades-old statute would be scrapped and companies would no longer be forced to rehire workers fired for economic reasons even if the employer’s case is ruled unfounded. A judge instead can order damages.

Monti left untouched rules allowing a court to order a company to rehire workers unjustly fired if discrimination is proven, or in some instances if a judge rules disciplinary action was not legal.

The reform also includes a new unemployment compensation system, limits on temporary workers to encourage permanent employment and help get more young people into the work force and measures to guarantee gender equality in the work place — specifically outlawing the practice of having women sign open-ended resignation letters commonly applied in the case of pregnancy.

The government declined to make the measures effective immediately, leaving a vehicle for lawmakers to make changes.

Senate President Renato Schifani said the move was “appreciated” by Parliament.

The two Marios, both in their roles since November, have the seal of approval from German Chancellor Angela Merkel, a key figure in Europe’s drive to save itself from ruin.

“If you want to hear something positive about Italo-German cooperation, I can say this: I highly appreciate the work of Mario Draghi, and it goes without saying that I appreciate that of Mario Monti,” Merkel told reporters last week after meeting with Monti in Rome.

That’s a sea change in Italy’s image among its key European allies.

One of the last times Merkel was in Italy, she was greeted by then-premier Berlusconi who popped out from behind a pillar calling “cuckoo!”

Berlusconi enthralled Italy with his charisma and success, and humiliated it with an endless stream of sleaze that included tales of trysts with underage prostitutes, shameless cronyism and rampant corruption that fostered an entire culture of cheating.

Monti, a sober former EU competition commissioner who heads a government of experts, is challenging Italians through his policies to become better citizens. In Italy, being “furbo” or clever, but also carrying a pejorative sense of gaining an underhand advantage, has sometimes been more prized than hard work.

Berlusconi was seen as an exemplar of that kind of Italy.

Monti is putting the spotlight on another side of his nation — one of quality, precision and world class intellectual achievement. As the former head of prestigious Bocconi University, Monti embodies this spirit — as does Draghi with his background at MIT, where he earned his economics Ph.D.

Monti says he wants to instill a culture of merit, doing away with privilege that has made economic mobility in Italy among the lowest in Europe.

Tax evasion, long tolerated on many levels despite costing Italy between €120 billion to €150 billion a year, has become a priority from senior politicians to the baker next door. In recent weeks, raids on posh resorts and ordinary businesses have led evening newscasts.

In an unprecedented show of transparency, Monti and his Cabinet ministers have published their tax returns and financial and real-estate holdings on their ministry websites.

Monti also has set out to vanquish the image of women as sex objects that Berlusconi did much to foster, appointing three accomplished women to ministerial posts with substantial portfolios.

Berlusconi also had women in his Cabinet but few doubted they were selected more for their sex appeal than for political qualifications.

The changes are being seen in all walks of life — even the sex symbol-spawning fashion world.

Giorgio Armani, at his recent womenswear fashion preview for his Emporio line, put his models in flat shoes, saying Italians had grown tired of vampish women that became the prevalent archetype under Berlusconi. And the recent San Remo musical festival, usually a freewheeling affair, showed how discredited the sex symbol has become, as commentators and politicians criticized an Argentine-born starlet for allowing TV cameras a peek at an intimately placed tattoo.

Tough economic choices have been central to Italy’s new image.

In tandem, the two Marios have worked to lower Italy’s borrowing costs, which shot above the perilous 7-percent mark for benchmark 10-year bonds last year, endangering Italy’s ability to manage its public debt, the highest in the eurozone. Yields this week were at a safe 4.77 percent.

Monti has passed austerity measures and an emergency package to shake open competition, and is working on loosening labor regulations — all of which have helped restore confidence in Italy.

Draghi has contributed from his offices in the ECB tower in Frankfurt, where he has shown boldness in shaping European monetary policy.

The central banker did not hesitate at his first meeting as president in November to surprise markets with an interest rate cut. And he reportedly upset the president of Germany’s conservative Bundesbank by loosening rules for banks to obtain ECB loans.

It was a lifeline many experts say brought Europe’s economy back from the brink of catastrophe.

For now, at least, Italians are demonstrating great faith in their new leadership.

A poll taken at the end of February for Repubblica.it showed Monti garnering a 59 percent approval rating, up 2 percentage points in a month even after piling on new austerity measures. The poll of 1,000 people had a margin of error of 3.3 percent.

“He is making the situation better in this country,” said Alessandro Scala, visiting Rome from Bologna. “He is taking some important steps, he is improving the situation, even though he inherited a country that was not easy to govern.”

Marco Camisani Calzolari, an Internet entrepreneur, plans to name his son, due in a month, Mario. OK, so it’s his father-in-law’s name — but he proudly says it now gains a cachet that didn’t exist when the child was conceived.

“It’s a successful name,” Calzolari said. “It’s in fashion.”

___

AP business writer Colleen Barry contributed from Milan.

While alliances have been around for a while — some more successful than others — the brutal European car market characterized by plummeting sales, idled factories and fierce competition is pushing many automakers to look for partners for new technology and access to fresh markets without reinventing the wheel.

Industrial tie-ups are becoming even more urgent as the European market continues to contract. Sales were down 200,000 units, or 9 percent, in the first two months of the year, and the car market has lost some 2.5 million vehicle sales from its peak in 2006-07, according to figures from IHS Automotive.

“This requires more and more investment that nobody can do except through acquisitions and alliances,” said Carlos Ghosn, head of the 13-year-old Nissan and Renault alliance. “If Nissan were alone and Renault were alone there were many things we could not do.”

Targeted alliances are driven by the logic that a good four-cylinder engine is a good four-cylinder no matter who builds it, and no driver cares about what platform the car is on. Only when it comes to more powerful engines, does brand identity come into play. Maserati and Ferrari, for example, strictly restrict their powertrain technologies to those brands.

The Peugeot-GM alliance is somewhat broader. GM becomes the French automaker’s second-largest shareholder with a 7-percent stake, behind the Peugeot family, whose stake drops from 31 percent to around 25 percent.

“It represents an opportunity to build a strong and more profitable business not just in Europe, but in other parts of the world,” Varins said, allowing Peugeot to address tightening emissions targets in Europe and strengthen its position in emerging markets in a way not economically feasible on its own.

The two companies, however, will remain independent, Varin said, and free to maintain other more narrow alliances like those Peugeot already has with Ford for diesel engines, BMW for gasoline motors and hybrid technology and Fiat for light commercial vehicles.

“In some cases, it will allow us to broaden the scope of our partnerships,” Varin said, by adding General Motors volumes to Peugeot’s annual sales of 3.5 million. Last year, GM sold 12.8 million cars, which could rise to 14 million in 2012.

Recent automotive history is littered with failed partnerships, and Varin said that Peugeot is determined to learn from them.

General Motors entered in a similar alliance with Fiat in 2000. The deal was a stock swap with the same aims of sharing platforms and cutting supplier costs. In ended four years later when Fiat CEO Sergio Marchionne walked away with a $2 billion for the outstanding 20 percent share held by GM, and used the cash to help relaunch Fiat’s struggling automotive business.

Marchionne said that GM is a different company after the heavy restructuring forced by the financial crisis in the United States. Though Fiat is always looking for partners, he said it was not a deal that would have interested Fiat.

“A 7-percent interest in Peugeot-Citroen without dealing with the issue of integration on the European side, in my view, given our objectives, would not go far enough,” Marchionne said. “In the medium- and long-term it may be the right answer and it may satisfy the requirements that Peugeot and GM have. It does not meet our requirements.”

The GM-Peugeot deal calls for economies of scale on purchasing and the development of common platforms, with the first products on a shared architecture due out in 2016.

Varin said that the benefits would be evident in five years — and that the deal did not address the issue of idled factories, a point also made by Opel chief Karl-Friedrich Stracke.

Marchionne has warned that unless automakers can take out installed capacity by closing factories to meet current and expected demand levels, one or more automotive companies risk failure. He urged European Union officials to provide a road map in their capacity as the guardians of the single market.

Against that very real possibility of future bankruptcies, analysts believe that Peugeot and General Motors will move to close factories first.

“First you need to address the fundamental issue, and that is overcapacity,” said senior analyst Tim Urquhart at IHS Automotive.

The Paris-based carmaker lost €439 million ($578 million) on its car business last year, and is heavily exposed in Europe where it makes half of its annual sales.

GM’s European business lost around €700 million ($940 million) last year, which it is equally determined to turn around.

Varin dampened any speculation that the alliance would be expanded to include other players, saying making it successful will consume a lot of energy.

“Everybody has to focus on the synergies of $2 billion in five years that we have to do,” Varin said.

Marchionne said his constant pursuit of new partners is based on the desire to avoid capital waste. The nearly three-year-old Chrysler alliance is keeping Fiat profitable, even as the European business is losing money.

Marchionne jumped at a reporter’s suggestion that Volvo was looking for a partner for small engines, and said he was speaking to both Suzuki Motor Corp. and Mazda Motor Corp on possible future cooperation in Asia.

“I am interested in talking to anyone who is interested in sharing anything I have,” Marchionne said.

In an example of a successful alliance, Marchionne said Fiat has provided the platform and engine to Ford for its subcompact Ka, and produces it for them in Poland, where Fiat makes the 500, which occupies the same segment.

“I don’t think it has impacted one single iota the fact that I actually make that car for Ford,” Marchionne said.

While alliances have been around for a while — some more successful than others — the brutal European car market characterized by plummeting sales, idled factories and fierce competition is pushing many automakers to look for partners for new technology and access to fresh markets without reinventing the wheel.

Industrial tie-ups are becoming even more urgent as the European market continues to contract. Sales were down 200,000 units, or 9 percent, in the first two months of the year, and the car market has lost some 2.5 million vehicle sales from its peak in 2006-07, according to figures from IHS Automotive.

“This requires more and more investment that nobody can do except through acquisitions and alliances,” said Carlos Ghosn, head of the 13-year-old Nissan and Renault alliance. “If Nissan were alone and Renault were alone there were many things we could not do.”

Targeted alliances are driven by the logic that a good four-cylinder engine is a good four-cylinder no matter who builds it, and no driver cares about what platform the car is on. Only when it comes to more powerful engines, does brand identity come into play. Maserati and Ferrari, for example, strictly restrict their powertrain technologies to those brands.

The Peugeot-GM alliance is somewhat broader. GM becomes the French automaker’s second-largest shareholder with a 7-percent stake, behind the Peugeot family, whose stake drops from 31 percent to around 25 percent.

“It represents an opportunity to build a strong and more profitable business not just in Europe, but in other parts of the world,” Varins said, allowing Peugeot to address tightening emissions targets in Europe and strengthen its position in emerging markets in a way not economically feasible on its own.

The two companies, however, will remain independent, Varin said, and free to maintain other more narrow alliances like those Peugeot already has with Ford for diesel engines, BMW for gasoline motors and hybrid technology and Fiat for light commercial vehicles.

“In some cases, it will allow us to broaden the scope of our partnerships,” Varin said, by adding General Motors volumes to Peugeot’s annual sales of 3.5 million. Last year, GM sold 12.8 million cars, which could rise to 14 million in 2012.

Recent automotive history is littered with failed partnerships, and Varin said that Peugeot is determined to learn from them.

General Motors entered in a similar alliance with Fiat in 2000. The deal was a stock swap with the same aims of sharing platforms and cutting supplier costs. In ended four years later when Fiat CEO Sergio Marchionne walked away with a $2 billion for the outstanding 20 percent share held by GM, and used the cash to help relaunch Fiat’s struggling automotive business.

Marchionne said that GM is a different company after the heavy restructuring forced by the financial crisis in the United States. Though Fiat is always looking for partners, he said it was not a deal that would have interested Fiat.

“A 7-percent interest in Peugeot-Citroen without dealing with the issue of integration on the European side, in my view, given our objectives, would not go far enough,” Marchionne said. “In the medium- and long-term it may be the right answer and it may satisfy the requirements that Peugeot and GM have. It does not meet our requirements.”

The GM-Peugeot deal calls for economies of scale on purchasing and the development of common platforms, with the first products on a shared architecture due out in 2016.

Varin said that the benefits would be evident in five years — and that the deal did not address the issue of idled factories, a point also made by Opel chief Karl-Friedrich Stracke.

Marchionne has warned that unless automakers can take out installed capacity by closing factories to meet current and expected demand levels, one or more automotive companies risk failure. He urged European Union officials to provide a road map in their capacity as the guardians of the single market.

Against that very real possibility of future bankruptcies, analysts believe that Peugeot and General Motors will move to close factories first.

“First you need to address the fundamental issue, and that is overcapacity,” said senior analyst Tim Urquhart at IHS Automotive.

The Paris-based carmaker lost euro439 million ($578 million) on its car business last year, and is heavily exposed in Europe where it makes half of its annual sales.

GM’s European business lost around euro700 million ($940 million) last year, which it is equally determined to turn around.

Varin dampened any speculation that the alliance would be expanded to include other players, saying making it successful will consume a lot of energy.

“Everybody has to focus on the synergies of $2 billion in five years that we have to do,” Varin said.

Marchionne said his constant pursuit of new partners is based on the desire to avoid capital waste. The nearly three-year-old Chrysler alliance is keeping Fiat profitable, even as the European business is losing money.

Marchionne jumped at a reporter’s suggestion that Volvo was looking for a partner for small engines, and said he was speaking to both Suzuki Motor Corp. and Mazda Motor Corp on possible future cooperation in Asia.

“I am interested in talking to anyone who is interested in sharing anything I have,” Marchionne said.

In an example of a successful alliance, Marchionne said Fiat has provided the platform and engine to Ford for its subcompact Ka, and produces it for them in Poland, where Fiat makes the 500, which occupies the same segment.

“I don’t think it has impacted one single iota the fact that I actually make that car for Ford,” Marchionne said.