Government borrowing costs in Europe's southern countries have shot up as unsettled investors responded to raised expectations that Greece could leave the euro. David Pollard looks at the implications for the rest of the euro zone.
Business: it's on the up in the euro zone. Spanish retail sales rising nearly three and half percent on the year, its economy edging out of deflation, according to new figures. But it's not business as usual. A sense growing of this week as pivotal for Greece - and for its euro zone partners - like Spain. IG's Alastair McCaig. (SOUNDBITE) (English) ALASTAIR MCCAIG, MARKET ANALYST, IG, SAYING: ''We've seen regional elections in Spain. We know that there is a general elections later on in the year as well and in those regional elections we saw the anti-austerity parties gain a sizable foothold. I don't think that we can afford to see the ECB allow Greece to be a template for other nations to follow.'' Those worries driving bond yields up. The gap between Spain and Germany's borrowing costs at their widest in almost a year. Italy also a concern - and Portugal. The euro though recovered some of the ground it lost overnight. Nick Parsons of National Australia Bank. (SOUNDBITE) (English) NICK PARSONS, NATIONAL AUSTRALIA BANK, SAYING: ''It has almost been text book reaction. Spreads widening as they should have done, currencies moving as they should have done ... But I don't think it's anywhere near approaching panic. Nerves yes, panic no.'' No panic yet because there's still time for a deal. That at least is the hope of France - and the United States and China. All issuing statements late Sunday and early Monday calling for resolution. Contagion aside, a Greek exit could lead to humanitarian and political crisis in southern Europe. A prospect already prompting some debate over Germany's role in the crisis. A majority there are apparently happy with a Greek departure - though not all. (SOUNDBITE) (German) PASSER-BY, CHRISTA GRAUMETZGER, SAYING: "Imagine looking at a history book in a hundred years from now and finding that Europe has failed because of what happened in Greece, that would be a real pity." Leaving, potentially, Angela Merkel footing the blame bill, according to her critics. And - despite this pledge of support - her hardline finance minister too. (SOUNDBITE) (German) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING: "Europe lives on the ability to make compromises. And if one person can confirm that for the last few weeks and months, it's Wolfgang Schaeuble during endless hours, day and night, trying to look for compromises." No sign, though, of any compromise in sight yet.