On the face of it, Greece and its debt woes are intractable but the fallout appears contained.

That seems to be the reading that global stock markets are putting on the unfolding drama. Investors who took fright on Monday recovered some of their composure yesterday.

If one looks at the bonds of indebted nations such as Italy, Spain and Portugal for an indication of whether investors are panicking, their yields have spiked but have not reached crisis levels.

Most analysts agree that Greece's problems pose less of a threat to the global financial system than a few years ago. Most of its debt is no longer held by private financial institutions but by government bodies. Still, a sense of brooding uncertainty lingers.

Stock markets and investors are averse to the sort of uncertainty that comes with this uncharted territory.

If Greece does not meet the deadline on repaying €1.6 billion (S$2.4 billion) to the International Monetary Fund (IMF) this morning Singapore time, it joins an ignominious group of countries such as Sudan and Cuba, which have failed to settle their debts with the IMF.

Contagion is another worry. Should Greece exit the euro zone, what would it mean for Italy, Spain and Portugal? Britain, with its referendum by 2017 on whether it should remain in the European Union, is another longer-term threat to the EU project.

Closer to home, the immediate impact of a Grexit will be seen on bonds, regional currencies and the stock markets. Deputy Prime Minister Tharman Shanmugaratnam noted yesterday that "any setback in confidence could hurt a still tentative economic recovery in Europe, which will have spillover effects in the rest of the world economy".

The EU is one of Singapore's top trading partners, so any hit to Europe's economy would be felt here. As the US and China grapple with their own challenges, the Greek crisis adds to the uncertainty.

That is why the world is waiting and watching. It is not yet a Greek tragedy, but it may well turn out to be one.