After a short holiday hiatus, the crisis in the euro zone is back and as serious as ever.

Reuters:

Greece, where the crisis started over two years ago, the government is in a race against time to agree a bond-swap deal with banks that is crucial to a new 130 billion euro bailout package from European partners and the International Monetary Fund (IMF).

Without that package, Athens faces the threat of a debt default in March.

But talks with the banks and investment funds that are being asked to accept 50 percent losses on their Greek bonds to help pay for the bailout have dragged on for weeks, sowing doubts about whether Athens can really deliver.

"The risk of a disorderly Greek default is once again on the rise, with the threat of contagion to Italy and others," economists at Barclays Capital said last week.

Compounding the challenge, both Greece and France face elections within months that could complicate decision-making at the national level in two key states and thwart the broader bloc's ability to act swiftly at a time when pressure is high to bed down agreements sealed at an EU summit last month.

A key element of the summit package was a deal to funnel 200 billion euros to the IMF, money that could be used to offer precautionary credit programs to Italy and possibly Spain.

But the euro zone is struggling to get the 50 billion euros it needs from nations outside the currency bloc to meet its goal. A senior German official told Reuters on condition of anonymity that securing the participation of Britain, which has shown no inclination to contribute, was absolutely crucial.

The banks that hold Greek sovereign debt are balking at losing 50 cents on the dollar and who can blame them? And whatever Athens is selling, they don't want any of it. Hence, the possibility that come March, we'll be looking at a Greek default.

And the prospects for a Sarkozy victory in France are lessening all the time.

In France, polls suggest there is a good chance President Nicolas Sarkozy, who has steered Europe's crisis response along with German Chancellor Angela Merkel, could be pushed out of office by his Socialist challenger Francois Hollande.

While Merkel and Sarkozy have polar-opposite temperaments and clashed frequently when the Frenchman first took power in 2007, they are both conservatives, born just half a year apart, and have developed an effective, even close, partnership after years of high-pressure crisis summits.

And after years of frustration with the French president's shoot-from-the-hip style, government officials in Berlin say they are now worried about the end of "Merkozy," the most important relationship in Europe, in the middle of the crisis.

The socialists will run against Sarkozy's austerity budget despite the fact that once they're in office, they will be forced to do exactly the same thing. It's a measure of how screwed up things are in Europe that opposing political parties in Greece and France will probably win election based on reversing the budget cuts of their predecessors while being forced by circumstances to carry them out.

2012 is not looking like a good year in Europe.