(Reuters) - Greece's future in the euro zone may hang in the balance once more, but investors believe the market fallout from any current political turbulence can be insulated, unlike during the region's sovereign debt crisis of 2012.

Investors are betting that a rout in Greek markets, sparked by the latest political upheaval in Athens, will not spread, placing their faith in firewalls built following the euro zone debt crisis.

In fact, an HSBC list of the 10 biggest market risks for 2015 does not even mention Greece, even though if the Greek parliament fails to elect a new president by the end of the year, parliamentary elections would be triggered in which anti-bailout party Syriza would be favorites.

Of course, whether the market can remain so sanguine will depend on external factors, including the financial turmoil inRussia. So far, however, any prospect of Greek default and exit from the euro zone has been greeted with relative calm in other peripheral euro zone economies, such as Italy and Spain.

"The market believes that the rest of the euro zone can isolate the Greek problems and survive," Christian Schulz, an economist at Berenberg, said.

Greek shares and bond prices have plummeted since Prime Minister Antonis Samaras unexpectedly called an early presidential election a week ago. It raised the specter of May 2012, when the prospect of a "Grexit" sent yields in Italy and Spain close to all-time highs and stock markets plunged.

This time, damage to assets in the rest of the euro zone has been limited.

The price of protecting against a Greek default using five-year credit default swaps must now be paid upfront, a classic sign that investors fear Athens might not repay them in full.

It would cost $3.2 million up front to insure $10 million in debt. By comparison, Italian CDS have barely ticked up and cost investors $148,000 annually.

This relative calm is based on the assumption that if Greece defaulted the impact on private investors would be limited because 83 percent of Greek government debt is held by the public sector.

Furthermore, if panic did spread, other debt-laden countries could seek help from the European Central Bank and the European Stability Mechanism's bailout fund, inaugurated in October 2012.

"There's more firepower in the ECB's armory to prevent that kind of contagion and any aggressive market reaction," James McCann, a European economist at Standard Life Investments, said.

"The other side of it is that Greece is less systemically important."


The true test of how insulated the euro zone is from Greece will come only if the parliamentary election reopens the "Grexit" question.

A victory for Syriza, leading in the polls, would galvanize anti-austerity and Euroskeptic movements across the euro zone periphery, such as Spain's Podemos and Italy's Five-Star Movement.

"It will be very negative for other countries simply for what it means, which is that the (euro zone) can be undone," said Gianluca Ziglio, an executive director at Sunrise Brokers.

A Syriza request for debt relief from its international lenders might also imply a loss for the ECB on its holdings of Greek bonds, giving ammunition to opponents of ECB sovereign purchases or quantitative easing (QE).

It might also leave the central bank exposed to accusations of directly financing countries just as a European Court of Justice ruling on the legality of the ECB's bond-buying firewall is pending.

However, markets still assume Greece will be ring-fenced and that developments there would not affect any ECB prospects of quantitative easing .

"Some of the extreme scenarios with Greece will provide arguments for the hawks in the ECB against QE kind of measures," Athanasios Vamvakidis, head of G10 forex strategy at Bank of America Merrill Lynch.

"So there will be a debate, but we expect that what will prevail will be a proper policy in place to isolate the rest of the region from Greece."