WHAT NEXT IN EUROPE: European leaders are locked in a fierce debate over how to solve the debt crisis that is killing growth on the continent, including whether to ease up on the terms of Greece’s bailout deal. Germany is resisting any changes.
THE BACKGROUND: A narrow victory for the New Democracy party in elections in Greece means that the country is more likely to stick to the harsh austerity terms of its €240 billion ($300 billion) bailout packages and avoid a chaotic exit from the euro for the moment. However, the elections have not given Europe the breathing space it needed to sort out its problems.
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THE OUTLOOK: Greece’s economy is still in a very vulnerable state. The country is in a fifth straight year of recession and could easily deteriorate so a default and euro exit are inevitable. It is looking to renegotiate some terms and conditions of the rescue loans it relies on to pay its bills. Meanwhile, Spain and Italy continue to see their borrowing costs rise, increasing pressure on their government finances and keeping alive fears that another big bailout might be needed.
