June 20th, 2012
02:42 PM GMT
(CNN) - Now that the Greek people have voted and a government will be formed, we need to think about where this crisis will go.
The new Greek government will invariably go to Brussels and ask for some relief; breathing space is the phrase that will be used.
The Europeans will almost certainly grant it - to not do so would be cruel, especially bearing in mind the terrible suffering of people in Greece at the moment.
But outside of Greece what happens now? Like a balloon that is squeezed, the European crises merely bulge out somewhere else - and that is what is happening now.
Greece may no longer be the terrible threat to the euro it was a few days ago, so instead attention turns to Spain, with its bond rates at the unsustainable level of 7%. Or to Italy with its rising rates. Or Ireland, where they will be seeking better terms too if Greece gets relief. Or to the intransigence of the German government.
The problems within Europe's banks now threaten to become the most serious side of this crisis. Spanish banks are the most obvious evidence of this, but make no mistake - French and German banks are also nursing nasty assets on their balance sheets which have not yet fully been accounted for.
The banking system is so linked that any problems with those Spanish banks will inevitably take its toll on its German and French counterparts. They may be able to withstand the losses, but at what cost? Cutting back on traditional lending to small and medium-sized businesses, which in turn slows down economic growth even further.
You start to see how this crisis is perpetuating itself. The Greek crisis has not been taken off the stove - it has merely been moved to the back burner while other more pressing problems are dealt with.
But with the relief negotiations still to take place, along with a possible weak coalition and an economy in its fifth year of recession, expect Greece’s financial problems to bubble up to the surface again before long.