The half-life of a European success is getting shorter and shorter. Last week's bailout of Spain (euphamistically referred to by Prime Minister Mariano Rajoy as "what happened on Saturday") saved the world for 48 hours, with everyone thinking all was good at Saturday lunchtime and realising that it was still messed-up by Monday. The results of the Greek elections look to have saved the world for 48 minutes.
The headlines (mostly written before the election was even declared, to be fair) declare Europe to have survived "a close call" and been granted "a stay of execution" as "Greece gives Europe a chance", and this morning economics correspondents are still filing pieces claiming Greek result buys Europe time.
For a while it looked like they may have been right. Spanish 10 year yields opened at 6.84, before falling in the first few minutes of the day to 6.817. Italian yields also dropped slightly, and the country's main stock index, the FTSE MIB was up over 1 per cent over Friday's close.
But by 8:49, the MIB was down to where it had been on Friday, and is now 1 per cent down. And by 9:14, the Spanish 10 year yields had rocketed up, not just to where they were, but to a new high of 7.12 (chart via FT alphaville):
The problem is, as we wrote this morning, that the election of New Democracy does nothing to solve the underlying crisis in Greece – nor does it take Spain off the hook. Both countries are in the throes of a full-blown (though strangely slo-mo) banking crisis, and Greece is additionally suffering under an austerity program which is unlikely to be sustainable, either politically or economically, while its relationship with the European Union remains unchanged.
Except for the replacement of PASOK with SYRIZA in the Greek two-party system, the victory for ND represented a return to the status quo. And, regardless of your opinion of the possible replacement for it, the status quo was kind of crap.