Greek tragedy redux

Sunday's election puts the spotlight back on the debt crisis

For some months, footage of West Asian refugees crowding into Greece's island entrepôts had driven from public attention the debt crisis that has posed a far bigger threat to the European project for the past decade. The unexpectedly strong showing by Alexis Tsipras' left-wing Syriza party in Sunday's election is a forceful reminder that Greece's crisis is far from over.

If there is a message from results of this low-turnout poll, it is a grudging acceptance by a tired electorate of the austerity package imposed by the European Commission (EC), the European Central Bank and the International Monetary Fund (IMF) - famously known as the troika - for the third international bailout since 2010. That understanding has been a long time coming, not least because of the long-drawn drama and serial political gambles by Mr Tsipras since his left-wing party was elected on the back of an anti-austerity platform in January. The stance was popular only with the Greeks struggling with a steadily shrinking economy, unemployment rates at 25 per cent levels and the highest poverty rates in Europe. When it became clear by the mid-year that Greece was in danger of defaulting yet again, the troika, far from being sympathetic, imposed even harsher austerity measures. With no room for manoeuvre, Mr Tsipras attempted to bolster his position with a referendum on austerity. Unsurprisingly, the Greeks overwhelmingly voted against the austerity package but lenders remained unmoved. Thus, in July Mr Tsipras was forced to concede to the troika's demands for further spending cuts and draconian tax reforms to receive euro 86 billion, the first part of its third international bailout since 2010, which secured Greece's membership in the Eurozone, a decision that Parliament endorsed. The closure of banks and financial markets for weeks was a stark reminder of the perils of ignoring debtors' demands. The snap elections Mr Tsipras called in August could be a test case for his contrarian performance, but he will face the bigger test next month when the next tranche of the bailout package falls due.

Debtors are unlikely to see significant change in the state of the Greek economy. First, the bailout money is scarcely being invested in productive assets, so critical to kick-start the economy; it is merely being paid to the banks to pay off their creditors. The European Commission has forecast that Greece's economy could shrink by another four per cent this year. Government debt now stands at 177 per cent of gross domestic product or GDP. The options before Mr Tsipras to revive the economy are limited in the current global economic situation: sell public assets and attract foreign investment.

Meanwhile, the IMF thinks Greece is unlikely to make a full economic recovery without some debt relief, in terms of longer grace periods, longer payment schedules and lower interest rates, and it has said it would not contribute to the bailout package unless the lenders agreed to do so. If this should happen, the bailout would effectively be dead and Greece's exit from the Eurozone inevitable. And Mr Tsipras may well find that this second victory is purely a Pyrrhic one.