Markets cautious over Greek debt deal and whether it can save it from default and euro exit

Markets reacted cautiously Tuesday to the news that Greece finally secured its second massive bailout in less than two years, which is aimed at giving the debt-ridden country the breathing room to enact widespread economic reforms and set it back on the path to growth and prosperity.

That is the most optimistic hope in Europe’s capitals but with many hurdles still to be cleared and the country still lumbered with massive amounts of debt even after its private creditors agreed to a huge writedown of debt, the prevailing view in the markets is that Greece remains insolvent and that its debt crisis still has a few more chapters to run.

Greek Bailout Won’t Rid Europe of ‘Danger’

Billionaire investor George Soros predicted weak growth and lingering political tension that could shatter Europe’s economic union even if Greece agrees to austerity measures.

“Right now the European Union and particularly the heavily indebted countries face a lost decade,” Soros said.

“It might actually be longer than a decade because Japan that had a similar situation with the real estate boom and the banking crisis has had now 25 years of no growth,” Soros said.

“That will create tensions within the European Union, which could destroy the European Union,” he said.

“And that’s a real danger.”

Greek Debt Wrangle May Pull Default Trigger

Opposition to payouts on Greek credit-default swaps from European Union policy makers is softening as disputes over a voluntary debt exchange threaten to push the nation into default.

Any agreement between the Greek government and the Washington-based Institute of International Finance on debt write downs will only bind 50 percent of investors in the 206 billion euros ($270 billion) of notes being negotiated, Barclay’s Capital estimates.

Hedge funds may resist a deal, seeking to get paid in full or compensated from insurance contracts.