The more interesting question to ask is if this deal will trigger payments from credit default swap insurance on Greek bonds. Normally it should because the agreement is clearly akin to a technical default. If the body that decides on such matters argues that it is not a default, they run the risk of significantly damaging the credibility of the CDS markets, causing even greater burden on the borrowing of the other Euro-zone economies that are struggling with their debt.
If, on the other hand, they consider this action as a default, there is still great uncertainty as to how it will unfold. Just as in the Lehman and Dexia debacles in 2008, nobody really knows what the counterparty risk really is. We may have an idea of the amount of exposure and the main counterparties but we don't, for example, really know the counterparty to those counterparties.
The point is that in either of the two scenarios, there is bound to be ripple effects and it is difficult to estimate beforehand what the outcome of those ripple effects are likely to be.
If reason prevails (not always a given in financial markets), the governing body will rightly recognize the deal as the equivalent to a default. Greece has evidently defaulted on its debt, the question is, where will it spread next?
