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Greece's debt: What happens if deal fails?

Greece debt default looms if 75 percent of debt-holders don't go along with the negotiated restructuring plan. Even so, market reaction to a disorderly default on Greece's debt could be minimal.

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 “The triggering of CDS should not be a surprise. It’s a mark to reality and the right thing to do, and should be a positive aspect,” Padhraic Garvey, head of developed markets rates and debt strategy at ING Wholesale Banking, told CNBC.

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 There is already “anger” from fixed income managers that CDS haven’t been triggered yet, according to Toogood.

 “It’s incredible and there’s an awful lot of anger about it. If CDS are triggered, it means they’re worth something,” he said.

 CDS were last in the limelight at the start of the current financial crisis, when they were blamed for the collapse of investment bank Lehman Brothers.

 A trigger of CDS is already priced into the foreign-exchange market, according to Steven Saywell, European head of currency strategy at BNP Paribas.

He believes that there is potential for the euro to rebound on a successful deal.

 The sovereign bond market for Greece and other euro zone countries could also be affected.

 “They’re a very small component of the market in sovereign bonds, so I don’t think it would have a huge impact,” Saywell told CNBC. “However, the markets are not going to take anything for granted until this is actually signed.”

 Fears of contagion spreading to other euro zone countries have colored the negotiations with Greece. Portugal and Ireland, which both took bailouts around the same time as Greece’s first bailout, are often reported to be next in the firing line.

 “Portugal and Ireland are two very different cases,” Harvey said. “Ireland has the confidence of the capital markets. Portugal is still speculative grade and that has led to capitulation selling.”

 He added: “The Greek deal doesn’t necessarily need to have specific ramifications on Ireland and Portugal. For Ireland, it’s more about the referendum and for Portugal more about getting the job done internally.”

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