People were actually glued to their TVs last night in Europe watching the vote unfold in the Greek parliament.  I’m sure that must have been a first!

Papandreou’s narrow win means that the latest lurch to crisis after crisis has come to a pause — the PM now has the authority to ask his party and parliament to pass the tough austerity measures sought by Germany and France in return for their allotment of another tranche of cash.

But of course all of the underlying problems remain:  will the austerity measures restore Greek finances or push Greece into deeper recession?  Will the Greek people peacefully abide by the decision of their parliament (that too would be a first!)?  Or will they respond to the austerity measures with further riots, strikes, and non-compliance?

How will the reduction in payments on Greek bonds affect Greek and other banks?   Will Europe recapitalize them as needed?

If all goes well (a big if!) private bond-holders will swallow their modest losses on Greek bond principle and returns, banks that need to be recapitalized  in consequence of bond losses will get funds from ESFS, and the austerity measures adopted in Greece, Britain, and elsewhere will be met with a return of economic growth, allowing austerity to deliver improving fiscal strength across the EU.

But this is a hope, and I am not sure what lies in the “PLAN B” if, as seems likely, growth remains so weak that austerity measures (themselves contributing to short-term weakness) do not deliver fiscal gains, and finances in the weaker European governments continue to sink.

Much will depend on whether the US returns to rapid growth and China sustains its mild, soft landing;  the EU will need to import growth from somewhere in order to move forward.