Markets have reacted calmly to a breakdown in talks between Greece and its creditors on its debt bailout, remaining confident that a deal is within reach. But they may be in for a surprise as Greece and the rest of the euro zone seem to be further apart than ever, says Saxo Bank’s Chief Economist Steen Jakobsen.

But even if Greece and its creditors fail to reach a deal, there is no real reason for panic among investors outside Greece, according to Steen Jakobsen. While there may be volatility in the markets, any major financial damage will be limited to Greece rather than the wider euro area and the euro.

The real risk to Europe will be political, says Steen Jakobsen. The rise of the Greek government’s ruling party Syriza on an anti-austerity platform could be mirrored in other European countries struggling with the burden of debt in the wake of the global recession. In Spain for example the far-left Podemos party has emerged as a real contender, challenging the established People’s Party and Socialists.