Political tumult in Greece, plunging stock and bond markets, the threat of default and exit from the euro: the script is eerily similar to the nightmare scenarios of 2010 and 2011.

Debt-infested Greece skidded close to the edge then, saved by 240 billion euros ($297 billion) in emergency loans improvised by European governments led by a reluctant Germany. Now, after achieving some signs of economic recovery, the government in Athens is again teetering, provoking a fresh round of doomsday speculation.

Investors ran through the worst-case options yesterday, as they contemplated a chain of events starting with a deadlocked presidential election this month that could bring anti-bailout forces to power, putting Greece’s status in the euro back into question.

“Europe’s not out of the woods yet,” Peter Fisher, a former U.S. Treasury and Federal Reserve official who is now senior director at the BlackRock Investment Institute, said on Bloomberg Television late yesterday. “They’ve got a long way to go to create a real monetary and capital markets union.”

Greek stocks dropped 1 percent today after the benchmark Athens Stock Exchange Index plunged 13 percent yesterday, the steepest fall since 1987. Ten-year bond yields soared again after jumping 93 basis points to 8.18 percent yesterday, roughly where they were in April 2010 during negotiations on the first bailout.

To be sure, the European Union is better prepared now than in 2010, when a 20 billion-euro hole in the Greek budget evolved into a continental crisis that claimed Ireland, Portugal, Spain and Cyprus as victims, and nearly splintered the now 18-nation euro.

Back then, aid funds like the European Financial Stability Facility and European Stability Mechanism didn’t exist. Neither did the European Commission’s intrusive monitoring system, designed to flash red when a country is headed for economic or fiscal trouble.

David Fuller's view

I will not pretend that I know what Greeks will decide to do in an emotional election environment, but this looks to me like a ploy for more ECB assistance.  If I was a Greek voter I would probably decide that having done much of the hard work, Greece’s future was probably better within the EU than outside it. 

Europe is better prepared to survive Greek brinkmanship or even withdrawal from the EU, largely because of Mario Draghi, but is the entire EU better prepared to deal with its decades-long and self-inflicted problem of mediocre GDP growth?  I do not think so, although it is never too late to change course, especially when the solution to economic decline is not a mystery.  Fortunately, Europe has not yet driven away all of its highly capable and entrepreneurial citizens, although plenty of them now live in London.