Market relief over Greece's election results faded quickly on Monday, with Spain suffering a jump in its borrowing rates as investors worried that the crisis shaking the 17 nations that use the euro was far from over.
A narrow victory by Greek conservatives, who favor upholding an austerity program that their country entered into in exchange for an international bailout, relaxed fears that Greece would be forced out of the euro. A return by Greece to its old currency, the drachma, would have caused turmoil across Europe and beyond.
But concern that the fundamental setup of the euro is unsustainable, and will ultimately cause Spain and Italy to need bailouts, shook those countries' bond and stock markets.
While Germany's DAX closed 0.3 percent higher at 6,248.20, France's CAC-40 fell 0.7 percent to 3,066.19. Britain's FTSE 100 rose 0.2 percent to 5,491.09.
The biggest market movements were in the next most financially vulnerable countries, like Spain and Italy.
Spain's benchmark 10-year bond yield jumped 0.25 percentage points to 7.12 percent, around the levels that caused Greece, Ireland and Portugal to need foreign aid. Spain could be able to withstand raising money at those rates for a few weeks, but would find it too expensive in the longer term. Madrid's main stock exchange closed down 3 percent.
Italy's 10-year yield also rose, to 5.91 percent, on concern that it would be next after Spain to need help, due to a recession and high debt.
The euro fell 1 percent to $1.2569.
On Wall Street, the Dow was down 0.2 percent, while the S&P 500 lost 0.1 percent.
Investors appeared skeptical that European policy makers' would be able to resolve a crisis that has bedeviled markets for more than three years.
Leaders of the Group of 20 most developed countries are meeting in Mexico to discuss the crisis and the slowing global economy. Both President Barack Obama and Mexican President Felipe Calderon of the host country downplayed chances for concrete results going into the summit.
European leaders will then meet on June 28, but hopes for a big solution are low.
Analysts were quick to underline that while Greece's election result avoided immediate catastrophe, Europe's underlying crisis was as bad as ever.
VTB Capital analyst Neil MacKinnon noted that Greece "remains in a debt trap and the economy is still stuck in a depression," and concluded "ultimately the scenario of a Greek exit from monetary union remains in place."
On Sunday, pro-bailout parties in Greece won enough seats to form a coalition government. Greece has been dependent on rescue loans to operate since May 2010, after it was shut out of international markets following years of profligate spending and falsifying financial data.
Greece had to agree to austerity measures to get its bailout. Measures included deep spending cuts on everything from health care to education and infrastructure as well as tax hikes and cuts in salaries and pensions. Anger at the measures has sent Greeks into the streets in frequent strikes and protests, some of them violent.
Some analysts said the election results could overstate the willingness of Greeks to embrace austerity, that it merely reflected their fear of falling out of the euro.
No one is sure how bad a Greek exit from the euro would have been. Greece would almost have certainly defaulted on its debt, triggering losses for European banks that own its government bonds. The outcome of the election, however tenuous, gives Greece a chance to breathe life into its moribund economy.
But even with Greece in the euro, European leaders will need to take action to support financially weak countries like Spain from being overwhelmed by their debt loads or bailouts of ailing banks.
To help Spain, Germany and other financial strong countries in Europe would have to agree to jointly-issued eurobonds or a banking union that is able to bail out banks directly. Both would spread the costs and risks of debt across multiple countries.
However, despite pressure from Spain, Italy and France, Berlin has ruled out such moves. Fears that European leaders will find no new measures was behind the market turmoil hitting Spain and Italy on Monday.
Earlier, Asian stocks had closed higher, before market sentiment soured. Tokyo's benchmark Nikkei 225 index closed up 1.9 percent to 8,721.02. Hong Kong's Hang Seng rose 1 percent to 19,427.81. Australia's S&P/ASX200 added 2 percent to 4,136.90 and South Korea's Kospi climbed 1.8 percent at 1,891.71.
China's benchmark Shanghai Composite Index added 0.4 percent to 2,316.05. The Shenzhen Composite Index gained 1.1 percent to 964.71.
The dollar rose to 79.13 yen from 78.71 yen late Friday in New York.
Benchmark oil for July delivery was down 25 cents to $83.80 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 12 cents to end at $84.03 a barrel in New York on Friday.