Europe still in crisis mode with Spain on the brink

The eurozone remains in big trouble - despite an election result in Greece that lessens the likelihood of an imminent disaster.

Greece’s neighbours looked on with wary relief yesterday as conservative leader Antonis Samaras received a mandate to launch coalition talks after coming first in national elections that follow weeks of uncertainty over the debt-crippled country’s future in the continent’s joint currency.

Victory by a party supporting Greece’s bailout deal opens the way for negotiations with its international creditors on giving it more time and room to fix its broken finances.

And European officials are signalling a willingness to talk and avoid a disastrous aid cut-off hat could force Greece out of the euro. However, Spain’s borrowing costs are climbing ever higher. Its ability to keep a lid on its finances without the help of an international bailout was thrown further into doubt yesterday when its borrowing costs smashed through the 7 per cent level at which Greece Portugal and Ireland sought assistance.

The problem is that Spain’s €1.1 trillion economy is bigger than those of the other three altogether. Hopes that a key June 28-29 summit of European leaders would produce any bold rescue plans look likely to be dashed.