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Greek crisis: 2,400 hours of brinkmanship

Would you believe 14 weeks have already passed since the Greek bailout extension deal was agreed? That's about 2,352 hours of twists and turns, reform talks, rumors and misinformation. No wonder most analysts and investors admit being bored. But is that boredom breeding complacency and can investors dare to hope this week brings the situation to a close?

Any expectations of a deal were dealt an early blow this weekend when Greek Prime Minister Alexis Tsipras, accused bailout monitors of making "absurd" demands and seeking to impose "harsh punishment" on Athens.


Greek Prime Minister Alexis Tsipras
Ayhan Mehmet | Anadolu Agency| Getty Images
Greek Prime Minister Alexis Tsipras

At the G-7 meeting last week U.S. treasury secretary Jack Lew effectively told the negotiators to quit the brinkmanship: "Let's treat every deadline like the last."

So that must be Friday June 5 when Greece must make a further 300 million euro ($327 million) repayment to the IMF - right? Wrong.

The IMF confirmed late last week that the Greeks could make a balloon payment of 1.6 billion euros at the end of June rather than four individual ones. The Greeks haven't asked to do that yet but it feels like another financial stay of execution if they need it.

Provided the banks can withstand the pressure. Reports on Friday suggested up to 800 million euros was pulled out of Greek banks in less that 48 hours last week, taking deposits down to the lowest level in more than a decade.

To counter concerns, Alexis Tsipras said last week that deposit outflows had stabilised last week while sources close to government announced a deal was being drafted.

Hurrah. Except Greece's creditors then denied a deal had been struck, saying progress was being made, but more work was needed.

The European Central Bank's trillion-euro bond-buying program was meant to be the balm that soothes all the fears of a "Gr-accident" and yet equities markets in the US and Europe rallied when "the-deal- that-wasn't" was announced.

Read MoreECB faces crucial test of 'whatever it takes'

Investors do still expect a deal to be agreed. Why? Because that's what always happens with Greece eventually – isn't it?

Yet some analysts aren't so sure. Oxford Economics argued in a note last Wednesday that the outcome is more finely balanced that markets current expect. "There is a 67 percent probability of an agreement being reached, a 55 percent probability of the program staying sufficiently on track to avoid capital controls in the next 2 years, and a 48 percent exit probability," the economists said.

An additional point jumps out. Even if we get a deal this week, it is unlikely to be a long-term solution and the talks over a third bailout deal will still loom large. Never mind the implementation risk In Greece on any measures and reforms the government agree to.

Are we underestimating the likelihood that the government of Alexis Tspiras and Co will cave in these negotiations?

I frequently hear the point made that Tsipras' support is dwindling. Support for his stance may have halved in recent polls, but we shouldn't underestimate his popularity at home and the lack of appetite to accept further austerity. The opposition pro-Europe New Democracy party have not seen any gains in support even as the economy dwindles.

Tsipras has got plenty of reasons to drag this out.

European Commissioner for Economic and Monetary Affairs Pierre Moscovici reiterated to CNBC that there is no Plan B. Maybe the European Commission don't need to consider one but investors, governments and central banks do.

Last week, ECB vice President Victor Constancio warned CNBC of the turbulence that will ensue if a deal isn't reached quickly.

Even if you believe a Greek default or exit can be contained and the euro zone will survive, isn't the greater fear here what this will mean for sentiment, risk assets and markets?

U.S. equities are trading around record highs after a lackluster earnings season and as data on Friday confirmed U.S. gross domestic product contracted by 0.7 percent in the first quarter.

Second-quarter data is already showing signs of recovery but it follows Federal Reserve Chair Janet Yellen saying she's still looking to raise rates this year in any case. We can't rely on bad news being good news for stimulus any more.

We should also consider whether Janet Yellen's more afraid of potential market turbulence created by the start of rate rises or that something else like a Grexit blows any U.S. recovery off course and she's not taken the opportunity to raise rates while she had it.

It isn't just about the U.S. China's Shanghai market snapped a seven-day winning streak on Thursday last week falling 6.5 percent. The tech-heavy Shenzhen Composite, which had more than doubled this year alone, lost 5.5 percent - its third-biggest fall in five years. The Chinese Central Bank providing liquidity to offset the growth slowdown with one hand and trying to temper enthusiasm with the other.

Read MoreSurging Shanghai stocks a bubble: China strategist

Japanese equities meanwhile are also trading at 15 year highs despite the concerns regarding the efficacy of Abenomics. Japan's central bank governor Haruhiko Kuroda told CNBC last week he's not concerned about brewing bubbles.

That's just the equity markets. Never mind for the bonds markets. With all the liquidity sloshing around you'd be forgiven for questioning investors ability to gauge fair value any more.

Even without the Greek woes it is enough to make any risk taker cautious.

So while investors grapple with value, economic recovery and the calibration of extraordinary monetary policy the question is whether Greece could trigger a more significant reassessment of current pricing?

Maybe, maybe not. But each day these negotiations drag on that risk becomes more likely and investors would surely be wise to expect decent volatility while we wait.

-- Follow us on Twitter: @CNBCWorld. Follow Julia Chatterley: @JChatterleyCNBC