The on-again, off-again bailout of Greece is running out of time, and the markets are getting nervous. This is reflected in the widening gap between yields on German and Greek bonds.

"I wouldn't bet on sharp decreases in Greek bond yields, especially those in the longer end of the maturity spectrum, given that the market will continue to reason that the risk of a default remains, even if the package is activated," he said, speaking by telephone from Amsterdam.
"The risk of default in the longer term — beyond next year, or the next two years — is still significant, according to the markets."

The immediate problem is that bailout talks are expected to take three weeks, while 8.5 billion euros of Greek bonds will be coming due before that time. The German finance minister says purchasing Greek bonds is "off the table". This leaves open the possibility of Greece being forced to sell dollar-denominated bonds, a situation that Latin America is familiar with.
Meanwhile, George Soros is wondering if interest rates are already too high for Greece to ever get out of its situation. The term he uses is a "death circle".

Soros said it was regrettable that Germany had insisted on an interest rate of as much as 5 percent for the aid package because it would water down the bailout's impact.
There was a "real danger" that such a high rate would cause Greece to cut its budget further, hurting economic activity and eventually undermining budget revenues, he said.
"Then it becomes a vicious cycle," he said. "I would call it a death circle. That's really the danger."