By Andrew Grice

Thilo Sarrazin, the former Bundesbank member who caused outrage with his racist theories about Muslim immigration, has stoked fresh controversy with a new book claiming that Chancellor Angela Merkel’s European policy is motivated by German guilt for the Holocaust and World War II.

Tens of thousands of Chelsea fans will line the streets of west London today to celebrate the club's historic Champions League and FA Cup double.

The Prime Minister's rhetoric on austerity sends one message to European leaders, but he is doing the opposite at home

Germany's chancellor apparently waded into Greece's choppy political waters today, with Athens saying Angela Merkel suggested that the country should hold a referendum on the euro together with next month's national elections.

Greece's day-old Parliament held its last session today to allow for new elections next month that are being cast as a decision on whether to keep the country in the 17-nation eurozone — even if that means accepting a deeply unpopular austerity programme.

France's newly elected President, François Hollande, stepped up his demands for more economic growth in Europe during his first meeting with Chancellor Angela Merkel last night and insisted that a switch away from mere austerity policies was essential to help crisis-ridden Greece remain in the eurozone.

President races from inauguration to meet Merkel in Berlin – and demands a growth plan

Differences between Mr Hollande and Ms Merkel are more of style than of substance

If body language is anything to go by, then the new Franco-German relationship got off to a cool, confused yet cordial start in Berlin last night. Jacques Chirac insisted on giving Angela Merkel a regal "hand kiss" at their first encounter. His successor, Nicolas Sarkozy, insisted on a full embrace.

Francois Hollande became president of France today in a ceremony steeped in tradition, taking over a country worried about Europe's future and pledging to make it a fairer place.

The eurozone has narrowly avoided recession thanks in part to stronger-than-expected growth figures in Germany.

Financial markets were plunged into fresh turmoil after Greece's political parties failed once again to agree to form a unity government, and European policymakers warned that Greece's aid payments would be cut off unless Athens quickly produced an administration prepared to deliver far-reaching economic reforms and budget cuts.

A consensus is starting to emerge that something needs to budge in terms of the current orthodoxy on the economics of austerity. In short, Europe, starting with Germany, needs to review the terms of the fiscal compact, loosen monetary policy and accept that cuts alone are not leading us towards recovery. If we continue where we are, the danger is that political instability of the kind that we are already seeing in Greece will spread, in some cases propelling extremists to the fore.