Greece has done as it was told. Now will Germany finally budge?
Greece voted the 'correct' way, but unless Germany makes big concessions, the slow motion car crash will continue
LAST WEEKEND'S election in Greece, the second in as many months, was billed as the moment of truth for the country. Was it going to remain painfully in the euro, or risk a return to the freedom and danger of the drachma?
On Sunday night, we were supposed to get the answer. Instead, both Greece and the eurozone find themselves back at square one.
New Democracy, which stood on a platform of staying in the single currency come what may, is expected to form a coalition with its old rival, the socialist Pasok, and the smaller Democratic Left. But while Greece certainly wants to keep the euro, it would be wrong to think it voted for austerity.
The brief market rally which greeted the news from Athens on Monday morning was short lived for a reason. All the political parties know that, whatever government emerges, it will not be able to honour the punitive terms of the country's eurozone bailout package.
The economy is in a worse state than ever. Meanwhile, the hard left Syriza grouping, which will not be joining the new coalition despite coming a close second in the election, has pledged not just to renegotiate the bailout but effectively to tear it up.
Such an opposition did not exist before. If Greece is to stay in the single currency, the next move will have to come from Berlin and Brussels. Unless they can ease the country’s plight, and soon, the chances of yet another poll in which Syriza would come out top - and the renewed chaos that would unleash - must be high.
But it is not just Greece that is affected by the ongoing euro grid lock. Recently, George Osborne observed that it might take a Greek exit from the euro to finally make the Germans take the necessary steps to salvage the rest of the single currency, before the whole project collapses.
Now that a 'Grexit' has been averted - at any rate for the time being - it is harder than ever to see who might push them into doing more.
Over the last two months the focus of the crisis has moved on to the much bigger economies of Spain and Italy. Yet in all important respects, Germany still refuses to budge, both on what it is prepared to do to help and - perhaps more importantly - on the timescale for doing it.
Top of the list is fiscal union. Berlin says it will happen when debtor countries have sorted themselves out. The debtors say it must be now if they are not to default. Eurosceptics in this country have convinced themselves that fiscal union is inevitable. A more realistic assessment is that its chances are probably receding in the face of German procrastination.
The same is true of possible moves by the European Central Bank to ease the situation. The ECB is constitutionally independent, and it alone has the ability to print euros. It can also buy bonds, albeit with restrictions.
Between them, these should give it real power. If it bought up enough debt from the countries in trouble it might yet get ahead of the game, even at this late stage.
However, in reality the ECB has turned out not to be so independent as hoped. In theory, it may be equally answerable to all euro members. In practice it, too, takes its lead from Germany.
The Germans often complain, with some justification, that they are seen as the villains in all of this, especially in Greece. But what do they expect, when they hold all the cards and everything is going so wrong?
A year ago, Sunday night's election result could have made a difference. Today, too many options have been closed off for it really to be able to change anything, either for Greece or the eurozone. The Greeks will get some concessions for voting the way big brother told them to. But they are likely to be small, and this is a very big crisis.
More and more, Europe looks horribly like a slow motion car crash with Angela Merkel at the wheel. Unless she swerves at the last minute, we are all going to end up hitting a brick wall. Either that, or the ECB must somehow wrest the wheel from her grasp.
Unfortunately, right now neither looks very likely.