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New Democracy Wins: But wins what? The helm of an unraveling economic and political order, a spot many believe no government can hold onto for long?

In any event, Greece's three main contenders — the establishment parties New Democracy (center right) and Pasok (center left), and the upstart leftist coalition Syriza — all substantially increased their shares of the vote in yesterday's parliamentary election.

With the bigger take and the 50-seat bonus for coming in first, ND has a smoother path to forming a coalition than after the May 6 election, and the rest of Europe may have a more complaisant counterpart with which to renegotiate the bailout (perhaps involving a longer time frame for public sector cuts and tax increases, and infrastructure stimulus). That might mean lower chances for a near-term exit from the euro by Greece, and reduced risk of mortal runs on banking systems across the periphery. (Periphery means pretty much everyone but Germany.)

But markets now appear firmly focused on the broad flaws and imbalances in the currency union, and fail to rally much on incremental "good news." Wall Street Journal, New York Times, Financial Times

In the Times, an article explored obstacles to a banking union, which would involve strong supranational supervision and shared deposit insurance. Noting the desiccation of interbank lending, the paper observed that "banks and their national regulators, anxious about the Greek elections and Spain's hastily arranged bailout, are behaving more parochially than ever." Columnist Paul Krugman wrote that the Greek catastrophe is a consequence of fundamental engineering weaknesses in the euro zone, and explained his point by making strong analogies to the "dollar area" in the U.S.: "consider an older example, the savings and loan crisis of the 1980s, which was largely a Texas affair. Taxpayers ended up paying a huge sum to clean up the mess — but the vast majority of those taxpayers were in states other than Texas. Again, the state received an automatic bailout on a scale inconceivable in modern Europe."

In the Journal, an article profiled the rationales of individual voters as they went to the ballot box, leading with an electrical engineer who swung to ND because, he said, "We have to stay in the euro, regardless of the pain." The paper also ran a roundup of post-election jockeying and statements by party leaders, and a profile of ND top dog Antonis Samaras, who "has made a fast turnaround from Europe-bashing populist to the continental power brokers' preferred choice to lead Greece." "Heard on the Street" ticked off factors militating against infrastructure spending as an engine out of the European recession.

The weekend papers carried articles on planning and assurances by central banks (New York Times, Wall Street Journal) and their dependents ahead of the election.

Also over the weekend, the careful diplomacy between President Obama and German Chancellor Angela Merkel over the euro crisis continued in an article in which White House aides told the Times fun facts that bespeak a lively rapport. Still, "the president finds himself in the strange position of having forged a relationship with Ms. Merkel that is perhaps the best he has with any foreign leader, but that has not yet resulted in the chancellor's agreeing to what Mr. Obama thinks must be done in Europe: an American-style bailout and fiscal stimulus." The Times also profiled Thessaloniki's mayor, a septuagenarian winemaker-turned-reformer. A year and a half into the job, Yiannis Boutaris "is trying something previously unheard of at this City Hall: employees are given job descriptions, goals, evaluations — and modest bonuses when they hit their targets."

For perhaps a more durable story line, there was Floyd Norris' "High & Low Finance" column last Friday. The currency bloc has kept other European nations from competitive devaluations, fueling Germany's export sector and debt bubbles around the periphery. Germany's public would have been on the hook if defaults had forced the country to bail out its banks, now it's on the hook through its stakes in the European Central Bank and pan-European bailout mechanisms, to which the debts have effectively been transferred in large amounts. The standoff continues.

Wall Street Journal

The paper looked at the profits banks are raking in from the refi boom relative to savings being realized by mortgage borrowers. Loan activity is being boosted in part by an expansion in the Obama administration's Home Affordable Refinance Program for underwater homeowners. One issue is that there are obstacles for competing lenders to provide refinancing to borrowers in another servicer's portfolio, making higher rates likely for such borrowers.

Some small banks are vexed by new regulations and are selling, and the number of deals has accelerated this year.

"Heard on the Street" highlighted the still-worrying opacity of the repo market.

The weekend Journal said that regulators are planning to ease liquidity rules proposed under Basel III, bowing to industry pressure. "In current exceptional conditions, where central banks stand ready to provide extraordinary amounts of liquidity against a wide range of collateral, the need for banks to hold large liquid asset buffers is much diminished," Bank of England Governor Mervyn King said in a speech last week.

New York Times

In his Saturday column, Joe Nocera praised Vikram Pandit as a throwback to Citi's consumer-focused leadership in the era before Sandy Weill. Unlike the swaggering Jamie Dimon, Pandit "isn't afraid to be boring," and serves as a counterpoint to a risky fixation on rapid growth.

Gretchen Morgenson devoted her Sunday "Fair Game" column to Drexel Hamilton, a small institutional brokerage "owned and operated by wounded veterans."


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