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Why Greece's woes could get even worse

ARIS MESSINIS | AFP | Getty Images

This week's market turmoil has dented confidence across the globe – but for those countries already struggling, the effects could be particularly bad.

Greece, already decimated by political uncertainty and much-publicized economic weakness, is likely to be even further wounded by the volatility on global markets.

Any investor confidence which had returned to the bailed-out euro zone country since its third bailout deal was agreed is likely to have been dented by the recent flight to safety.

A stronger euro - which is up over 4 percent against the dollar over the last two weeks - is not good news for Greek exports, which is likely to deepen the country's recession at a time when it can ill afford it.

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UBS analysts recently downgraded their forecasts for Greece's growth in gross domestic product to -1.6 percent this year, and -1.1 percent in 2016, down from previous expectations of 1.5 percent growth in 2015 and 2.5 percent growth in 2016.

Meanwhile, although some European indices made back recent losses on Tuesday, the ATHEX Composite, Athens' benchmark index, closed at 621.70 points on Tuesday, down 48 points since its most recent intraday high, on August 9.

Greece is facing new elections, probably on September 20, called by Prime Minister Alexis Tsipras after he made greater concessions on austerity to the country's international creditors than he had promised.

The country's new bailout program has, at least in its first disbursement, been used to service the country's existing debts rather than stimulate its moribund economy.

"The program means new austerity measures for Greece, but also certainty of financing, QE on Greek bonds soon and an array of growth-enhancing instruments – the challenge is now quick and effective implementation of the latter," analysts at Credit Suisse wrote in a research note Tuesday.

Yet these austerity measures may be increasingly difficult to sell to the Greek population. There is still a "serious" risk of the bailout being derailed, and consequently Greece leaving the euro zone, as UBS analysts wrote in a research note Tuesday. Tsipras's concessions may ultimately still not be enough, because of forces outside his control.

- By CNBC's Catherine Boyle