The third-place party in the Greek elections, PASOK, has been given the opportunity to form a new government, after the first two parties failed in their efforts. Nobody expects PASOK to be successful, meaning that new elections will ensue, probably on June 17. By that time, decisions will need to be made on bailouts and budget cuts, and there will be no government in place to do it. This puts the bailout plan in significant peril, as well as Greece’s place in the eurozone.

The Greek public simply could not accept the forced depression they were being pushed into by their bailout masters, and the elections showed clearly that was over. So now the Germans are trying to talk themselves into the idea that Greece could exit the eurozone with no repercussions (for Germany).

Germany’s Angela Merkel dismissed newly elected French President Francois Hollande’s call to renegotiate the European fiscal pact to include growth measures rather than merely budget constraints. But as more Euro governments face electoral opposition to austerity, Merkel’s position will become increasingly untenable.

If the Washington Post doesn’t like the results, then an election must be “shrill.” That would explain the lead sentence of its lead front page story on the elections in France and Greece on Sunday. As with most WaPo articles on economics, this one is full of misconceptions and factual errors.

Austerity for all! What could possible go wrong?

Could it be that Europe’s financial and political elites are finally coming to a “d’oh!” moment, when an unbroken string of policy failures and the simple logic of “depression plus austerity = worse depression” finally begin to get through?

As Jon Walker explained, Socialist candidate Francois Hollande is favored to win in the end, once he gets a head-to-head matchup with Nicolas Sarkozy. The important public policy consequence of that is that Hollande has vowed to veto the EU fiscal pact that locks in balanced budgets, which at this point amounts to locking in austerity in the midst of a recession. This is a major challenge to the Euro-group’s austerity policies.

The euro crisis has returned to Spain and Italy, an inevitable circumstance of a euro straight jacket exacerbated by austerity, and everyone except Europe’s policy makers realize nothing fundamental has been fixed in Europe since the last flaring of the crisis.

So everything that’s happening in Europe now is patchwork – a stiched-together Greek bailout, a hoped-for reinforcement of the bailout fund as a firewall against contagion, and a lot of crossed fingers. Nobody has yet reckoned with the real problems, which is huge trade imbalances caused by a common Euro whose valued doesn’t reflect the relative economic condition of each country.

After an all-night round of talks among Eurozone finance ministers, Greece was granted its second bailout, this one for €130 billion, in a package that includes recently passed austerity measures and a debt restructuring. But confidential reports distributed to the finance ministers indicate that the deal will not work and may even be counter-productive.