Bankers, investors and world leaders gathering in Mexico this weekend were closely watching the election, which will help determine whether Greece sticks to the terms of a $170 billion bailout that it agreed to earlier this year.
Early exit polls showed a pro-bailout party and an anti-bailout party running close.
The anti-bailout party, Syriza, has promised to cancel the terms of the bailout. If that happened and Greece couldn't pay its bills, it would likely become the first country to leave the group of 17 that use the euro.
A Greek exit from the euro would almost certainly lead investors to flee stocks. Paul Christopher, chief international strategist for Wells Fargo Advisors, said Friday that the Standard & Poor's 500 index could drop 15 percent in weeks.
The investment firm UBS predicts that the Greek economy would collapse, contracting 45 percent to 50 percent in the year after Greece dropped the euro and returned to its old currency, the drachma.
"Things that were previously thought unthinkable are becoming thinkable," said Laurence Wormald, head of research at SunGard's APT, which does research for pension funds, hedge funds and other institutional investors.
Fearing a wider euro breakup, investors would demand higher interest rates on the government bonds of Spain and Italy, driving those countries' borrowing costs to unsustainable heights.
The banks that owned the bonds would absorb huge losses. Amid rising fear, banks could refuse to lend money to each other, causing a credit crunch like the one that followed the collapse of the Lehman Brothers investment bank in 2008.
Analysts said that financial markets have had a long time to brace for Greece's moment of reckoning, so the reaction to the vote might not be as severe as it could have been.
"We've had three years of run-up," said Lawrence Creatura, portfolio manager at Federated Investors. "The Greek elections are important, obviously, but some people are forecasting that if it doesn't go the right way, there will be Armageddon, locusts and raining frogs."
In the worst case, economists expect, the world's biggest central banks - the U.S. Federal Reserve, the European Central Bank and the Bank of England - would flood financial markets with cash to restore calm.
The Dow Jones industrials rose 115 points Friday on hopes of a central bank rescue.
If the pro-bailout parties prevailed, it would buy time for European policymakers to build their defenses against financial turmoil.
They could raise more money for Europe's bailout funds. And they could move ahead with plans to set up a centralized European bank regulator and centralized deposit insurance that would protect savers.
Earlier this month, European countries agreed to lend up to $125 billion to Spain to save its banks. But investors have expressed skepticism that it will work and concern that it will add to Spain's debt.
(Copyright 2012 by The Associated Press. All Rights Reserved.)