Greek deal is not the end of the story by any means

Now that the markets have seen that default can happen inside the eurozone as well as in the emerging world, they are likely to look for other possible countries that might want to welch on their debts

El Banco de GreciaEscribe Larry Elliott en–It could have been a disaster. Had Greece‘s private-sector creditors convincingly rejected the idea of exchanging their old bonds for much lower value new bonds the skies would have fallen in. Financial markets would have crashed, credit lines would have dried up, banks would have gone broke, the world economy would have headed back into recession.

Some of these things may still occur, but not right yet. Greece has won itself and the rest of the eurozone a breathing space by sweet-talking and strong-arming a majority of banks, pension funds, insurance companies and hedge funds to take big losses on their investments rather than risk losing the lot.

This, then, was a triumph for Greece but only in the way that Dunkirk was for Britain. And as Churchill said in 1940, wars are not won by evacuations. Greece will now get its second bailout, and the €130bn (£108bn) coming its way from the International Monetary Fund, the European Central Bank and the European Union will keep the wolf from the door for the next year or so.

Even so, this is clearly not the end of the story. Firstly, Greece – whatever the government in Athens or officials in Brussels might say – has defaulted. It will have to use collective action clauses (CACs) to impose the debt deal on investors holding out for better terms.

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