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Europe still far from finish line after Greek vote

WASHINGTON (MarketWatch) -- If you think the frontrunner is sure to win the race, ask Bodemeister what he thinks of I'll Have Another, the horse who overtook Bodemeister in the final furlong of this year's Kentucky Derby after he had led the entire race.

Antonis Samaras's New Democracy emerged as the leader from the latest round of Greek voting, but does anybody think this race is over?

Alexis Tsipras's radical left coalition, Syriza, was second in this round of voting, but Greece is hardly in the home stretch and it's too early for anyone to declare victory.

Tsipras, who campaigned on a complete rejection of the onerous bailout terms imposed on Greece, conceded "defeat" Sunday night and ruled out joining any "national unity" coalition with Samaras.

A new threat by former Finance Minister Evangelos Venizelos, leader of the mainstream center-left party Pasok, not to join a coalition unless Syriza also joins was quickly dismissed as posturing. Venizelos sees his party threatened with extinction and wants to lay down a marker that Tsipras is rejecting the cause of "unity."

Presuming that Venizelos will buckle under to international pressure and form a coalition with New Democracy, the government would be so inherently unstable that it would have virtually no credibility at home or abroad.

It has clearly dawned on Venizelos that Tsipras's willingness to remain in opposition will enable Syriza to usurp Pasok's position as the leading left-of-center party in Greece, ready to pick up the pieces when a center-right-dominated coalition does fail.

Doom-and-gloom economist Nouriel Roubini is only one of several analysts predicting an early collapse of whatever government is formed out of Sunday's election, if any. The possibility of yet another round of elections within weeks remains very real.

So while foreign investors were toting up the raw vote results for a coalition of the "pro-austerity" mainstream parties, the picture on the ground in Greece was far less clear.

Everyone from conservative German Chancellor Angela Merkel to Socialist French President François Hollande warned the Greeks not to vote for Tsipras, but Syriza nonetheless captured more than a quarter of the vote this time, adding some 10 percentage points to its shocking May 6 share of the vote.

The German edition of the Financial Times even published a heavy-handed editorial last week -- in Greek! -- urging voters in a country where it has no circulation to resist the "demagogy" of Tsipras.

Surging bond yields in Spain and Italy have already demonstrated that it is no longer an issue of how much austerity the Greeks are ready to stomach. The current European approach to the crisis is fundamentally flawed and doomed to failure.

But pillorying Greece is supposed to intimidate government leaders and voters in these countries into believing there are no alternatives.

And, in fact, given Germany's intransigence regarding measures that would reflate the European economy, there are no alternatives.

If the present course is maintained, the euro (EURUSD) of 17 countries can no longer be sustained. The only question would be whether some form of rump euro will be preserved or whether the joint currency would unravel altogether.

Already, the euphoria at averting a Tsipras victory appears to be short-lived, with European stocks tanking on Monday, and Spanish bond yields rising.

Conventional wisdom now has it that even a brief respite under a Samaras government will give the European Union time to ring-fence Greece so that country can be thrown under the bus with little consequence for the rest of the euro zone.

But does anyone really believe that the Spanish will be any more willing than the Greeks to live with 20%+ unemployment for any length of time, or continue to see a future in the euro when they see what Germany is willing to do to Greece?

So don't collect your winnings on that front-running horse just yet. Europe has a ways to go before it reaches the finish line.