Europe’s relief from Greek voting results likely will be fleeting

Associated Press

ATHENS, Greece

Greece’s election result has eased fears of imminent financial disaster for Europe, but the continent’s leaders still are searching for a way to contain a debt crisis that threatens the global economy.

A narrow victory for the New Democracy party in Greece means that the country is more likely to stick to the harsh austerity terms of its $300 billion bailout and not face a chaotic exit from the euro in the very near future — an event many fear would destabilize Europe and send shockwaves through the world.

The country’s economy still is in a very vulnerable state, however. It is in a fifth-straight year of recession and easily could deteriorate to a point where a default and euro exit were inevitable.

Europe is struggling to put out several fires, not just the one in Greece. Heavily indebted Spain and Italy saw their borrowing costs rise Monday, increasing pressure on their government finances and keeping alive fears that another big bailout might be needed. That would considerably strain the eurozone’s ability to protect its members and keep the currency union together.

The eurozone’s challenges run deep. The economy is expected to shrink this year, with the so-called peripheral countries such as Greece and Spain in painful recession. Many of its banks remain on life support, propped up by emergency credit from the European Central Bank.

Europe is a substantial trading partner with the rest of the world. If it falls into a deep recession sparked by a default in Greece or a massive bailout for Spain, orders for goods made in the U.S. and China are going to start falling off.