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 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 the British army’s evacuation from the beaches at 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 130 billion euros 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.

Secondly, the use of CACs will likely trigger payouts on credit default swaps, the insurance policies investors take out to protect themselves against default. A few months ago the prospect of payouts on credit default swaps would have prompted a forest-fire type reaction through financial markets, but the Greek default has been in the offing for months and there is unlikely to be any immediate knock-on effect.

That said, 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. Contagion is the third big issue, with Portugal the obvious candidate to be the next Greece with its combustible mix of recession, high unemployment, punitive debt-servicing costs and a discontented population. Spain, where the economic news has been dire in recent weeks, also looks vulnerable.

As Louise Cooper of BCA Partners noted, the price of the new Greek bonds on the grey market suggested that the country’s private-sector creditors will see the value of their holdings drop by 80-90 per cent, which is a pretty strong incentive to dump the sovereign debt of any other country seen as likely to default.

Fourthly, the losses swallowed by the banks and the pension funds have an economic cost, especially in Greece. At a stroke, financial institutions have seen the value of their assets dramatically reduced at a time when banks are under pressure toincrease the amount of capital they hold.

An under-capitalised banking system is the exact opposite of what Greece requires if it is to have any hope of pulling out of its deep recession. This leads on to a fifth point, namely that even after the debt write-down, Greece’s debts will remain cripplingly high. — The Guardian, London