Relief over the Greek election result gave way to concerns about problems in Spain and the wider euro zone on Monday with European shares and the single currency reversing early gains.
Greek voters gave a majority to parties supporting the country's economic bailout, easing worries about a break up in the euro zone and initially boosting markets, but investor focus quickly returned to the finances of other indebted countries.
"While Greek euro exit fears have thus eased, this outcome does little to alleviate the weak fundamentals that currently weigh on Spain and Italy," Michala Marcussen, strategist at Societe Generale, said in a research note.
Spain's key 10-year government bond yields rose 22 basis points to 7.14 per cent, the highest level in the euro era and above the rate at which Greece, Ireland and Portugal were forced to seek international bailouts.
Italian 10-year bond yields rose 15 bps to 6.08 per cent .
Spanish and Italian stock markets also both underperformed the broader European equity market.
Spain's IBEX fell 0.9 per cent, while Italy's FTSEMIB was down 1.2 per cent. The FTSEurofirst 300 index of top European shares reversed early gains to be down slightly at 992.88 points.
The euro was flat on the day at $1.2636 U.S., off a 1-month high reached earlier in reaction to the Greek vote.
In Greece the centre-right New Democracy party was trying to form a coalition government with other parties committed to the €130-billion ($164-billion U.S.) bailout deal after narrowly defeating the radical left SYRIZA bloc in Sunday's election.
However, many investors were concerned that the overall political picture in Greece was uncertain, with SYRIZA vowing to continue its opposition to the painful austerity measures.
"A new Greek coalition government is unlikely to be able to restore economic growth or deliver effective reform without substantial financial help from the rest of the euro area," said Trevor Greetham, Director of Asset Allocation at Fidelity Worldwide Investment.
He said it would take substantial action from the world's largest central banks to turn the global growth cycle around.
"In the meantime, we remain cautious on stocks and commodities, preferring gilts, global property and cash in our multi asset funds," he said.
Markets are expected to stay on edge all week due to a heavy schedule of high level meetings among world leaders and global central bankers.
The heads of the Group of 20 major industrialized and developing nations meet in Mexico later, and are expected put heavy pressure on Europe's leaders to come up with a lasting solution to their 2-1/2 year old financial crisis.
The U.S. Federal Reserve's rate-setting committee begins a two-days meeting on Tuesday, while euro zone finance ministers gather on Thursday, and a mini summit of German, French, Italian and Spanish leaders is scheduled for Friday in Rome.
Announcements from any one of these events could move markets although most major investors hold extremely risk averse positions, and seem unlikely to change their pessimistic outlook for Europe's crisis in the next week.