Initially buoyed by the pro-euro outcome of Greece's election, European stock indexes have seen their gains pared amid fresh eurozone debt contagion fears. Spain and Italy were embattled with higher borrowing costs.
Greece's election results, which reaffirmed the conditions of the country's international bailout, gave European markets only a brief sigh of relief before stocks started sliding again only hours after trading started on Monday. Market rallies were nipped in the bud by news from Spain and Italy, which saw their costs of borrowing fresh money rising despite the pro-euro news from Athens.
The two big southern European eurozone nations have come under fire for poor financing, widening the gap between what they have to pay and what Germany - as the continent's economic powerhouse - has to pay. The yield on Spanish 10-year sovereign debt went above the 7.0-percent level, which is widely viewed as unsustainable.
The short-lived positive market reaction provided a strong indication that the Greek election result did in no way resolve the serious problems of the euro area.
Growing market pressures
"The election outcome does little to alleviate the weak fundamentals that currently weigh on Spain and Italy," Societe Generale economist Michala Marcussen told Reuters news agency. "Our concern remains that little will be delivered in terms of additional risk-sharing measures, leaving markets vulnerable to renewed stress."
Nonetheless, the leaders of Italy and Spain welcomed the victory by Greek politicians committed to the terms of the bailout by the European Union and the International Monetary Fund (IMF).
"This allows us to have a more serene vision for the future of the European Union and the eurozone," Italian Prime Minister Mario Monti told reporters in Mexico ahead of a G20 summit there. Spanish Prime Minister Mariano Rajoy called the outcome of the Greek election "good news for the euro and also for Spain."
hg/ncy (dpa, Reuters)