* Euro STOXX 50 down 1.4 pct, hits lowest since December
* Greek bourse down 7.9 pct, banks sink
* If Greece fails to form coalition, steeper losses seen
* French vote adds uncertainty, but less of a concern
By Toni Vorobyova
LONDON, May 7 (Reuters) - European equities slumped to 4-1/2 month lows on Monday after elections in France and Greece that reflected deep public discontent over austerity measures and cast doubt over the euro zone's ability to fix its debt crisis.
In Greece, voters turned away in droves from the parties that had agreed to the international bailout that has kept the country solvent.
The two parties failed to win enough votes to form a governing coalition, plunging the country and the wider euro zone into political uncertainty and opening the door to possible fresh elections as soon as next month. (ID:nL5E8G707V)
In France, Socialist Francois Hollande claimed the presidency from Nicolas Sarkozy. The move was widely expected but investors anxiously awaited details of his economic programme after he proposed a tax for the ultra rich, a financial transactions levy and a longer timeframe for eliminating the country's deficit.
"The election results at the weekend are not helpful to calming the worries already in the market after disappointing (U.S.) payrolls report on Friday. The political uncertainty is increasing and over time the euro zone political landscape looks less predictable," said Gerhard Schwarz, head of equity strategy at Baader Bank.
"Global investors are waking up to the situation in Europe, that things are not running that smoothly. (Recent euro zone data) certainly heightens fears that we are in a more prolonged slump, and that might be further accentuated by political uncertainty."
The Euro STOXX 50 index of top euro zone bluechips was down 1.4 percent at 2,217.38 points, after falling as far as 2,204.73 - its lowest level since late December 2011.
The benchmark Greek index slumped 7.9 percent in early trade to its lowest since January, while the Greek banking sector tumbled 19 percent
"We are very worried about Greece, it (will) be difficult to make a new coalition. I hope they will do it, because if they don't we are heading for 10-15 percent downside for the European stock market," said Francois Duhen, equity strategist at CM-CIC Securities in Paris.
"If they cannot get a coalition which will provide what they promised to the EU and the IMF, they will not be given more money and they will go bankrupt. Then there is a risk of contagion to Portugal and Spain."
The Spanish market fell 1.5 percent, Portugal was down 0.6 percent and Germany lost 1.6 percent. Against that, a drop of 1.2 percent on the French CAC did not stand out.
"For France, we have more or less what was expected, investors had the time to adapt to that in advance. Plus there has been no attack against the financial world (in Hollande's victory speech) which is very important ... So based on this I do not expect the French market to underperform," Duhen said.
Implied volatility on the Euro STOXX 50 index, seen as a barometer of investor risk aversion, spiked to four-month highs .
Market moves were exacerbated by relatively subdued volumes with Britain shut for a public holiday.
Banks - which have the most direct exposure to euro zone's sovereign debt and have already had to make big writedowns on Greek exposure - were among the worst hit sectors.
Credit Agricole slumped to an all-time low as the Greek election result revived concern about a possible exit from the euro zone and the effect such a move would have on the French bank's Greek unit Emporiki. (ID:nL5E8G71PV)
There were few corporate announcements to detract investors from the politics. BASF, the world's largest chemical maker by revenue, saw its shares drop 2.6 percent after saying it believes southern Europe is in a recession and expects the continent's economy to barely grow this year. (nL1E8G4CPB)
