But those same financial markets are not so easily placated in today’s world. Remove one proximate cause of a global synchronous meltdown, and another springs to take its place, or another two or three, which in its hydralike fashion is an ironic paean to ancient Greek mythology. The financial world has yet to adjust to the reality of global linkages and the potential for global meltdowns that the crisis of 2008 revealed as one of the signal dangers or our era. The possibility that the fragile coalition of PASOK–New Democracy might just crumble before a government is formed was enough to temper the initial enthusiasm of markets, which are far more prepared for crisis and catastrophe than for resolution and moving forward.

The meeting of the world’s leading economic powers at the G20 summit in Mexico on Monday and Tuesday is already focused on how to halt the wildfire spread of panic throughout Europe and the potential for that to go viral and global. You would be hard-pressed to read one piece of informed (let alone uninformed) commentary and analysis that speaks with much optimism and hope that the leaders of the world given the current economic structures of various countries can act effectively to staunch contagion. Judging from the tenor of these analyses, we are doomed now or doomed later, but doomed we are.

We are told that the Germans will countenance no “mutualization” of European debt akin to what bound together the American states in the 1790s and binds them together even now. We are told that China’s economic model is showing not only cracks but early signs of terminal flaws; that the United States is headed for a fiscal cliff; that the once-stellar emerging stories of Brazil and India are losing luster fast; and that the world is drowning in a sea of too much debt, too much austerity, too little growth, poor leaders, and structural problems that will get worse before they get better.

Many of the less popular contenders in Sunday’s battle are familiar faces on the Greek political scene. Evangelos Venizelos, 55, of the socialist PASOK party, which shared ruling power over Greece with New Democracy for years, was a strong favorite on May 6, but performed miserably, getting just 13.2 percent of the vote. Because of PASOK’s parliamentary history and Greece’s current financial debacle because of bad management, Venizelos, a former finance minister, is seen by many as past his prime. Final polls showed his support somewhere between 9.9 and 15.5 percent.

The May elections gave life to Greece’s extreme-right party, Golden Dawn, led by 55-year-old Nikolaos Michaloliakos, who received a shocking 7 percent of the vote on a promise to expel all illegal immigrants from the country and to set land mines along the borders to stop any from trying to return. Golden Dawn supports an anti-bailout, anti-euro solution and vows that Greece needs to reinvent itself. At last count, the most extreme party left on the ballot was polling at about 5.5 percent.

The rest of the lineup won’t stand much of a chance to win big, but they may hold the key to what sort of coalition Greece might come up with and how long it will last. Populist Panos Kammenos, a 46-year-old fireball who formed the Independent Greeks after bailing from New Democracy, has a somewhat schizophrenic anti-bailout, pro-euro plan for the country, telling followers that it is possible for the country to ditch the bailout agreement but remain part of the euro zone. Kammenos got 10.6 percent of the vote on May 6 and is polling slightly lower at 5.3 to 7.4 percent ahead of Sunday’s vote.

Greece’s Communist Party (or KKE) is led by 66-year-old Aleka Papariga, one of only two females among the top party leaders. She has been blamed for instigating violent anti-austerity riots through her anti-euro, anti-bailout battle cries that Greece should leave the European Union entirely. She got 8.5 percent of the vote in May and is polling between 4 and 6.3 percent in the last published surveys. Greece’s oldest political party, the Democratic Left, is currently led by 64-year-old Fotis Kouvelis who has campaigned on a pro-euro, anti-bailout agenda that includes severe spending cuts in defense, public administration and health care and a tax hike on businesses and financial institutes. They won 6.1 percent of the vote in May and have been polling slightly higher at 4.4 to 8.8 percent ahead of Sunday’s ballot.

Nearly half of Spanish loans are issued by Spain’s savings banks, known as cajas de ahorros: semipublic institutions that, prior to a 2010 reform, were unlisted and had to allot a percentage of their profits to social programs. The regional governments, however, oversee the cajas. In many cases, regional politicians have used their influence over the cajas to finance unsound projects.

On the eastern coast of Spain in Castellón, for example, sits a $250 million airport that has yet to welcome an airplane’s wheels on its tarmac. With visions of golf courses and luxury resorts to build during the boom years, the former provincial leader needed an airport. No problem.

Down in Castilla–La Mancha, a desolate area south of Madrid known as the home of Don Quixote, the local caja got in over its head with another political boondoggle: a casino resort and an international airport. Nevada-based Harrah’s and other developers eventually scrapped the casino plan, but in 2008 Caja Castilla–La Mancha (CCM) and the regional government built its $1.4 billion airport. No problem. It could accommodate 2.5 million passengers a year, but drew around 45,000 annually for the two routes scheduled. The airport shut down in April.

How Big is the Spain Bailout?

The exact amount of Spain’s bailout is unknown, but it could be up to $125 billion. The exact amount will be revealed after outside accountants complete an audit of the banks by June 21. When an amount is settled on, the loans will be sent to the Spanish government’s Fund for Orderly Bank Restructuring, which was created at the outset of the crisis, but has since been nearly emptied helping the smaller failed banks. Also unknown is where the money will come from. It will either be sent from the European Financial Stability Facility—the zone’s $550 billion rescue fund—or the new $625 billion European Stability Mechanism.

How the Money Will Be Used

Spanish officials are quick to point out that the money will be specifically targeted at the country’s troubled banking sector. In other words, it is not a sovereign bailout, but a banking bailout. Some are referring to it as a “bailout lite” since it is targeted specifically at banks and is smaller than previous bailouts. In fact, Spanish Prime Minister Mariano Rajoy has attempted to avoid calling it bailout altogether, instead describing it as a “line of credit.” Government officials even claim that as long as banks pay back the money, it will not increase the nation’s deficit. They also insist that Spain will not need all the funds being offered, but that the $125 billion figure includes “a safety margin.” But not everyone thinks “bailout lite” will be enough. While the International Monetary Fund estimated that $46 billion would be the minimum bailout needed to shore up the country’s banking sector, JPMorgan expressed the belief that Spain eventually will need a full IMF/EU bailout, which the bank calculated would total between $350 billion and $450 billion.

These fears are so deeply embedded in all discussions of what is taking place that it is nearly impossible to have a coherent discussion in financeland about real risks and their likelihood. Yes, Greece may indeed elect a rejectionist coalition June 17 that refuses to implement the punishing austerity measures demanded in return for bailout funds, and yes, that could indeed lead to lots of bad things. And yes, China may simultaneously suffer the hard economic landing that so many have feared for years, with real estate truly crashing, growth halting, and instability following. And yes, the U.S. government may approach the “fiscal cliff” in the fall and fail to pass new tax and spending laws, thereby triggering downgrades and economic contraction.

All of these are possible. The question is, are they probable? The very fact that they are possible now means in financeland that they are likely, hence the tendency to sell now, seek safety, and then analyze. For Western publics, mired in years of slow or no growth—and, in the cases of Spain and Greece, stuck in a deep recession that is getting worse—the view forward is grim, and fears have greater weight than arguments for more constructive outcomes. The result is a global feedback loop of increasing negativity, which in itself has become yet another risk.

Yet at each moment in the past few years when those fears have reached a crescendo, actions have been taken to prevent everything from unraveling. Central banks have acted and governments have coordinated, almost in spite of protestations to the contrary. German officials have affirmed their support of the euro, but have almost routinely dashed any hopes that the European nations might join together and jointly absorb losses or issue debt before they have carved a common fiscal union at some point five or 10 years down the line. Yet at each moment of most acute tension, whether in the late spring of 2010 or late fall of 2011, Germany has bowed to necessity, and funds have materialized. Even in the United States, the budget impasse of the summer of 2011 ended with a resolution, not a default.

Now imagine that the only way to deal with these problems is for Nevada and California to go cap in hand to Virginia or Texas—where unemployment today really is half what it is in Nevada. Imagine negotiations between the governors of all 50 states about the terms and conditions of the bailout. Imagine the International Monetary Fund arriving in Sacramento to negotiate an austerity program.

This is pretty much where Europe finds itself today. Whereas the United States, with its federal system, has—almost without discussion—shared the burden of the financial crisis between the states of the Union, Europe has almost none of the institutions that would make that possible.

The revenues of the European central institutions are trivially small: less than 1 percent of EU GDP. There is no central European Treasury. There is no federal European debt. All the Europeans have is a European Central Bank. And today they are discovering the hard way what some of us pointed out more than 13 years ago, when the single European currency came into existence: that’s not enough.

But at the rate Europe’s weaker economies are crumbling, there is no guarantee that the euro will last at all. On Saturday, Spain earned a dubious distinction as the fourth European nation to accept a European bailout when the finance minister announced that the country’s banks would accept an estimated €100 billion EU handout. Portugal, Ireland, and Greece (nicknamed the PIG nations) have also accepted bailouts, paving the way to a sort of fiscal death when it comes to the social costs extracted from the population attached to EU handouts. So far, the Spanish bailout will not stipulate any new austerity measures and instead will regulate the banking sector. But few are optimistic that the banks alone can save Spain from a similar fate to Greece’s.

With Greece going back to the polls and Spain trying to save its assets, all eyes naturally turn to Italy, largely seen as the next weakest link. Austerity measures have caused growing distrust in the interim government and anger among Italians who feel squeezed from paying taxes and cutting social benefits. A poll last week showed that more than half of the Italian population thought life was better before the euro. “There is a permanent risk of contagion, contagion from Greece, from other countries,” said Italian technocrat Prime Minister Mario Monti. “That is why strengthening the euro zone is of such collective interest.”

In the meantime, Europeans in the Southern regions are taking extraordinary measures to protect what little they have left out of fear even that will disappear. Panic-driven bank runs have led some financial institutions to limit daily cash withdrawals in Greece, Spain, and Italy. In Spain, the exodus of $31 billion in the month of April alone is what triggered fear and led to the near collapse that led to the bailout. Some Greek banks are already limiting ATM withdrawals to less than €100 a day in cities like Athens to try to control the exodus of euros to other countries for safekeeping.

Since 2009, Greeks have been exporting some $4 million each month from Greek banks. And if Greece is forced out of the euro zone, there is no way the country will be able to avoid rationing food, oil, and health supplies. “Europe’s monetary union has entered a doom loop,” writes Niall Ferguson in this week’s Newsweek, likening the current crisis to the events of the summer of 1931, when “all over Europe, the extremists of the right and the left—fascists and communists—surged in popularity.” Is history circular? The outcome of next weekend’s Greek elections could provide the first real glimpse of whether or not the euro nations are doomed.

Tsipras is putting Greece itself at dauntingly big risk. He may conceivably be right that EU governments are bluffing when they insist that nothing in the Greek bailout deal can be renegotiated. Its current terms doom Greece to an ever deeper depression that will leave the wretched country still more deeply mired in debt. And the trumpeted deal is already unraveling on the markets: the new Greek bonds issued after private investors took a 75 percent haircut a mere two months ago are trading at distress levels already, showing 21 percent yields on 10-year debt. Tweaking the bailout terms could postpone the day of a default that seems inevitable, in the hope that by then the rest of the euro zone would be less vulnerable to contamination. In addition, there is the awkward fact that there is no “legal” way to kick Greece out of the euro. Because the euro is, by law, the currency of the EU and membership is theoretically irrevocable, there is no exit clause in the EU treaties.

But tweaking is one thing: Syriza’s demand to cancel the deal outright, halt debt repayments, and reverse pension and salary cuts is another matter altogether. There is already considerable EU exasperation that Greece has loaded pain on private citizens while failing to actually sack a single one of its 790,000 civil servants, a pampered multitude. If the Greeks do elect a Syriza-led government, they may rapidly find out whether a chaotic default, return to the drachma, and devaluation does in fact offer eventual escape from the debt trap they find intolerable. What Tsipras sees as calling Europe’s bluff looks to Greece’s German paymasters like atrocious blackmail.

And that, only a few months ago, would have been that: what Angela Merkel said, went—with Sarkozy’s publicly unflinching if privately somewhat frustrated support. No longer. For two years, Merkel has doggedly kept her hand stuck in the European dyke, proclaiming even as the cracks widened that, provided everyone manned the pumps round the clock, the dam was structurally sound enough to withstand the rising waters. All that was needed was the courage to undertake deep structural reforms, as Germany did in the 1990s. Abruptly, she finds herself swimming for her life. German financial clout is as great as ever, but it risks finding itself back in the position where Charles de Gaulle liked to describe it: that of a doughty German workhorse controlled by a French rider. From many European quarters, but most critically from France and even in Germany itself, Merkel’s tough disciplinary regime for Europe is finding fewer and fewer takers.

Merkel and Sarkozy, or “Merkozy,” were a decidedly odd couple. Sarkozy’s vaunted enthusiasm for reform evaporated as the French economy faltered, while his appetite increased for burden sharing—notably through persuading Germany to sink funds into Eurobonds that effectively would pool euro-zone debt. For Merkel, anything approaching a “transfer union” was—and is—anathema: better a crippling European recession (from which Germany is not suffering) than tying Germany’s currency to the whims of more profligate cultures. But the Merkozy couple was determined never to fall out. By contrast, the joke making the Paris rounds as it became likely that François Hollande would send Sarkozy packing was that a new packaging of the two names would have to be found. The favorite was not Merlande, but the more pungent Merde, which began to hit the fan within hours of the final count.

That still prompts a question: why does this matter so much? Governments rise and fall all over the world with numbing regularity, and some default on their debts, and life goes on. Greece, however, has become a metaphor for Europe, and its unraveling within the single currency of the euro has raised legitimate fears that as Greece goes, so goes all of Europe, which represents nearly a quarter of the global economy.

Greece matters because the European financial system is bound together by the euro, and no one can see a path to Greece completely defaulting (it has already partly defaulted) or leaving the euro zone without setting off a chain reaction that spreads not just to Italy and Spain but to France and finally to the rest of the more stable, balanced northern economies. And that, then, would inevitably spread around the world as the global financial system suffered the shocks of a European financial meltdown. No one could or would be fully immune.

It is easy enough to chart a course that gets you to some really nightmarish scenarios. Major banks nationalized, shareholders wiped out, pensioners bereft, governments scrambling for cash, printing money, widespread devaluation of currencies, American financial institutions pulling up the drawbridges and hoarding even more money, and the dominos falling in rapid succession. These fears have not faded much in the past two years, and they are intensifying once again.

Understandably, many American investors have simply given up on Europe. After two years of the world’s most tedious soap opera (“Can Angela get on with François, the new boy in town? Is Mario the real thing after phony old Silvio?”), they have come to the conclusion that it is only a matter of time before the whole euro zone comes crashing down, with Greece in the role of Lehman Brothers.

Meanwhile, in Berlin they still talk of “buying time.” They mean by this that as long as the European Central Bank keeps printing money, lending to weak Mediterranean banks so that they can buy the bonds of weak Mediterranean governments, it will all work out in the end. This is a delusion. The economies of the Southern European countries are in a disastrous state, comparable with the conditions of the Great Depression. True, they no longer have the Keynesian option to engage in deficit finance; their debts are already too large. But the German prescription of austerity tax hikes and spending cuts in the teeth of recession is losing political credibility with every passing week.

Suddenly it is no longer so hard to imagine a Greek politician deciding to gamble on exiting the euro zone, restoring the drachma, and letting a drastic devaluation do its work. Suddenly it is no longer so hard to imagine the horrendous consequences, with investors asking the obvious question: “If they can leave, who will be next?”