FRANKFURT — With an agreement to bail out Spain’s struggling banks, Europe again avoided financial chaos in a debt crisis that is in its third year. But Europe still faces far bigger challenges that threaten the Continent and, with it, the world economy.

The most urgent of those concerns is being driven by events in a country at the other edge of the euro zone: Greece.

While the Spanish banking rescue will be expensive — as much as $125 billion — it will be well within the means of a European emergency fund established for just such purposes.

Far harder to calculate are the costs if, after Greek elections next Sunday, the new government reneges on the bailout Greece negotiated with its European lenders a few months ago. That could lead to a withdrawal from the euro zone, threatening that currency union, which has largely benefited more prosperous members like Germany

“The stakes are exceptionally high,” Mr. Papademos, who is also a former vice president of the European Central Bank, told a group of bankers in Copenhagen last week. “Because the decisions to be made at, and immediately after, the forthcoming elections will determine the country’s future for at least the next decade.”

Those problems would not be Greece’s alone. Europe’s big fear is contagion — an infection of financial panic that could spread far beyond Greece. Spain’s leaders have long said Greece’s problems contributed to the general market uncertainties that helped undermine Spanish banks.

http://www.nytimes.com/2012/06/11/business/global/as-focus-shifts-to-rescuing-spanish-banks-worries-grow-over-greece.html?pagewanted=all&_r=0