Are markets too sanguine about contagion from Greece?

Despite concerns over Greece’s future within the euro-zone, the yields on government bonds in the rest of peripheral and southern Europe have generally remained low and close to those of Germany. This sanguine response reflects a number of factors, including the still-low probability attached by the markets to Greek exit and confidence in the ECB’s ability and willingness to limit contagion. But this calm seems unlikely to last.