Attention is focused on Greece where politicians are struggling to form a government after voters plunged their country into limbo in Sunday's election. The uncertainty has reignited fears its hard-fought bailout deal could unravel, forcing the country's exit from the euro.

"There is a push for lower (German) yields... I guess that will be the tone of the day as the market evaluates what's happened in Greece," said Achilleas Georgolopoulos, interest rate strategist at Lloyds.

Investors are also waiting to see how the new French president-elect, Socialist Francois Hollande, who wants to restore a pro-growth focus in Europe, deals with his German counterpart Chancellor Angela Merkel.

The most actively traded Bund futures contract was 24 ticks higher in early trade at 142.12 having hit a record high of 142.44 in the previous session.

The euro eased 0.3 percent to $1.3010 but stayed above Monday's three-month low.

The FTSEurofirst 300 .FTEU3 opened down 0.3 percent to 1,031.92 points while the blue chip Euro STOXX 50 index .STOXX50E shed 0.7 percent to 2,267.57 points.

(Editing by Anna Willard)

• A Permanent Economic Emergency