Vote came amid questions about political will and calibre of EU leaders and whether single currency can survive
Greece's election drama kicks off what may be the most volatile and uncertain fortnight in more than half a century of European Union, peaking in a crucial Brussels summit at the end of the month.
The election, revolving entirely around the question of whether Greece will do what it takes to stay in the euro, came as the climax to more than two years of unprecedented upheaval in Europe, posing fundamental questions about the political will and calibre of EU leaders and whether the currency shared by 17 countries can survive.
There is as yet little sign of an answer. Indeed, in Berlin, by far the most powerful of the EU capitals, it is said that in the third year of the crisis, Europe's leaders are still not even asking the right questions.
If they appear at a loss to come up with a persuasive response that could relieve Europe's agony, it is not for want of meeting, talking and arguing. That will be the pattern of the next 10 days.
The key EU leaders will spend the next two days in Mexico at the G20 summit preoccupied with the Greek fallout, the Spanish emergency, the prospects for Italy, and even whether President François Hollande's France is on the cusp of a rude awakening.
Germany's finance minister, Wolfgang Schäuble, will confer in Mexico with his French, Italian and Spanish counterparts to prepare a summit in Rome on Friday of the leaders of the four countries ahead of the Brussels summit on June 28-29.
In Mexico, David Cameron and George Osborne will find themselves in the invidious position of both urging the eurozone leaders to press ahead with the "remorseless logic" of monetary union by pooling sovereignty, liability and powers in a "banking union" presaging a "fiscal union", while insisting that the UK and the City of London be quarantined, unaffected by any new EU powers and the prospect of the European Central Bank (ECB) in Frankfurt gaining strong new regulatory authority over Europe's banks.
However, it is hard to see how a stiff new regime can work well if Europe's biggest banking centre, London, is not involved. German officials describe the British position as "schizophrenic".
The banking union quandary has all the makings of a major UK-EU bust-up. The notions being discussed are to have a new European resolution regime to shore up dodgy banks, funded by a bank levy to try to spare taxpayers from bailing out the mismanaged, to use the new eurozone bailout fund for direct recapitalisation of banks (opposed by Berlin, urged by Paris), and to have a eurozone deposit guarantee scheme, meaning pooled guarantees that savers wherever will not lose their nest-eggs. Germany, again, opposes this.
Amid an air of incipient panic, the European commission has been advising eurozone governments on the legality and feasibility of erecting capital and border controls to prevent a mass flight of money from Greece, although the Germans deny drawing up such contingency plans.
Eurozone finance ministers are to meet on Thursday in Luxembourg, with the Greek impact dominating the session.
The troika – the word has become the most hated and feared in the ministries of Athens and Madrid – of European and International Monetary Fund and European officials has said it will not return to scrutinise Greece until a proper government is in place. Meanwhile, Athens will require billions more in bailout funds by next month, while its side of the deal – more spending cuts, privatisation and civil service reform – languishes undone for lack of government.
The Germans insist that to benefit from the world's biggest-ever bailout, Greece has to deliver on its solemn promises. It is hard to imagine the German parliament agreeing to keep the bailout money flowing if the Greeks renege on the deal.
But the mood in Berlin is of futility and despair, heightened by the sense that last week's agreement to throw €100bn (£81bn) at Spain's banks has been a mismanaged fiasco, failing to impress the financial markets. The prevailing view is that Greece is a lost cause, but the sole reason for it not being abandoned is that it may make a bad situation a lot worse.
As a result of the second bailout earlier this year, most of Greece's debt is now owed to official rather than private creditors. Berlin says this makes a Greek default easier to contain.
But the contagion is already evident in Spain and well-connected German economists say that Greece's debt to eurozone governments and the ECB will need to be written down, while Athens will probably need a fresh injection – a third bailout – of up to €30bn. Then there's the question of whether a Greek sovereign default necessarily means a return to the drachma. The vast majority of Greeks want to stay in the euro and there is no legal mechanism for evicting the country. If Greece defaults but refuses to give up the euro, the eurozone lifeline will probably be cut off, leaving the country unable to pay its bills, pensions, and public sector wages.
In such a drastic scenario, Brussels and Berlin are talking of funnelling emergency aid "to keep the hospitals' lights from being turned off".
Despite the cautious hope that a "Grexit" can be contained, no one knows what the impact would be. The Greek dilemma aside, ahead of the summit at the end of the month, manoeuvring is in full flow to determine what a surviving and strengthened currency union might look like. Hollande, according to weekend French reports, is calling for a new €120bn "growth pact" to boost jobs and investment. But most of this is recycling funds already available or a repackaging of policies already agreed.
The heads of the ECB, European commission, eurozone countries and the president of the European Council are drafting what some call a "grand plan" for relaunching the euro, while Germany's Angela Merkel is belittling expectations of any breakthrough, as she routinely does before EU summits.
An early draft, obtained by the Guardian, states: "There are areas where the member states sharing a single currency, and others willing to join the effort, want to go further in their efforts to co-ordinate and integrate their economic policies." EU governments "should rapidly examine the European commission's proposals on EU-wide rules for bank recovery and resolution, deposit guarantee schemes and capital requirements."
But the draft is peppered with blanks, proving that the contentious and ambitious plans for a banking and fiscal union in Europe are far from settled.
