Greek deal: Are markets celebrating too soon?

A clear sense of relief in global markets on hopes of a Greek deal may be short-lived even if an agreement is reached, analysts say.

Germany's benchmark Dax stock index soared to close 3.8 percent higher, while stocks in Athens jumped to close 9 percent higher on Monday after the head of the Eurogroup, Jeroen Dijsselbloem, said he was hoping for an agreement later this week.

Read More Global markets soar on hopes of Greek deal

But any deal is unlikely to solve Greece's long-term financial woes and that means uncertainty about its future is likely to hang over markets for some time, analysts said.

"Markets feel like it's a done deal… My gut instinct is it would be wrong for markets to celebrate a Brussels' political mash-up compromise over economic reality," Bill Blain, a strategist at Mint Partners in London, said in a note.

"Nothing will be solved. I suspect it would be far better for everyone in the medium term to bite the leather thong, have a swig of brandy, and amputate Greece from the body-European now before the festering sore becomes even more a gangrenous distraction," he said.

Greece must repay a loan of about 1.5 billion euros ($1.7 billion) to the International Monetary Fund next week and is expected to default if it does not reach a deal with its creditors – the International Monetary Fund, European Central Bank and the European Commission.

The country's banks are being kept afloat by emergency funds from the ECB and Athens may have no choice but to impose capital controls in the days ahead to stem the outflow of cash from the country.

Caution

Jonathan Loynes, chief European economist at Capital Economics, said there were a number of reasons to be cautious.

"Even if a deal is in the pipeline, it will need to come together very quickly to prevent a default to the IMF at the end of the month and stem the outflow of deposits from banks," he said.

"Finally, it is far from clear that any debt relief agreed as part of the deal or afterwards will be anywhere near big enough to put a sizeable dent in Greece's debt mountain," Loynes said, adding that a debt write-off of as much as 50 percent may be needed to bring the country's debt levels back down to a sustainable level.

Greece's public debt is about 177 percent of its gross domestic product (GDP)– the highest in the euro area and one of the highest in the world.

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"We remain unconvinced that such a write-off is ultimately compatible with Greece's continued membership of the currency union. In short, some sort of deal may finally be on the way, but it is unlikely to bring the Greek crisis to a decisive end," Loynes said.

Indeed, in a sign that a deal was far from guaranteed, Germany's finance minister Wolfgang Schaeuble said on Monday that substantial proposals from Greece had not yet been received.

Emmanuel Dunand | AFP | Getty Images

Good enough?

Some analysts believed that deal on Monday would be enough to remove the cloud of uncertainty hanging over Greece's future for now, lower the risks for a potential exit of "Grexit" from the euro area and trigger a summer rally across share markets.

"Obviously if we do get a deal we're back to fundamentals, the euro zone is recovering, the ECB will keep buying bonds all the way through to next year, so the Dax could go higher," David Owen, chief European economist at Jefferies International told CNBC's Worldwide Exchange.

Analysts at Coutts added: "We continue to see Europe's corporate confidence building despite the Greek woes and revenues are now starting to grow, indicating a true economic recovery is beginning to take hold."

"If a Greek default, Grexit or Cyprus-style capital controls come to pass, or some combination of them, our bias is to go against the crowd and see any further sell-offs as a buying opportunity," they said in a note on Monday.