The big bailout for Greece that finally came through this weekend means Greece will have enough money in the short term to pay its existing debts. But it doesn't mean much more than that.
Greece is still in deep trouble. Its debt is still projected to skyrocket over the next few years, its economy is still projected to shrink, and its unions are still furious about pending cuts.
And the bailout was apparently already baked into broader European markets. The euro fell a bit against the dollar today, and the European stock market also declined.
Spreads on Spanish and Portugese debt narrowed "only modestly," Reuters said, suggesting that bond investors didn't take much comfort from the news of the Greek bailout.
Portugal had its debt downgraded last week, and may be next in line for a bailout. The situation in Spain is not quite as dire, but it's pretty bad. The unemployment rate just hit 20%, deficits are high and the economy is shrinking. Spain is a much larger economy than Greece or Portugal, and a bailout of Spain (if it came to that) would be much more expensive. As one EU official quoted by the Economist said, "the EU can't afford Spain."
Perhaps the most substantive news on this front today comes from the European Central Bank, Europe's equivalent of the Fed. The ECB lends banks money, and requires the banks to post bonds as collateral in return. Typically, those bonds must meet minimum ratings standards.
The ECB said today that it will suspend those standards and let banks to use Greek bonds as collateral for loans from the Bank, even if there are more ratings downgrades to Greek debt. That means the ECB could wind up on the hook for losses if Greece defaults.