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 is still in a very vulnerable state, however. It is in a fifth-straight year of recession and could easily deteriorate to 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 crisis is far from over,” Commerzbank analyst Christoph Weil said in a note to investors. “A sovereign default by Greece and the country’s exit from the monetary union have probably been avoided for the time being.”