Five Lessons From the Greek Election Result

Alexis Tsipras's left-wing Syriza won a new mandate in Greece's snap elections on Sunday after the prime minister's support for a harsh new bailout package imposed by the country's creditors cost him his parliamentary majority. But what can we learn from the result, and what does it mean for Greece, its economy, and its creditors?

1. How did Tsipras win?

Given that Tsipras's Syriza party—as well as its coalition partner, the Independent Greeks (ANEL)—had signed the bailout agreement in July, there was little political capital in the anti-austerity identity that initially propelled them to power. Instead, Syriza's campaign focused on the clash between the "old" and the "new," calling on voters to halt the "restoration" of Greece's traditional parties, which had ruled until last January. The implicit promise was that austerity reforms can be implemented more justly by Syriza than by center-right New Democracy or center-left PASOK. Opinion polling showed Syriza running neck-and-neck with New Democracy, but it also showed that the majority of undecided voters had voted Syriza in the January election and "No" in the July bailout referendum. Tsipras managed to mobilize these voters in the final days of the campaign by stoking the pervasive anti-establishment sentiment in Greek society.

2. What challenges does the governing coalition face?

The Syriza-ANEL coalition will have a very busy schedule in the coming months, as it will have to swiftly put through far-reaching reforms in pensions, the tax system and product and labor markets in order to receive a positive evaluation from Greece's creditors. This evaluation will determine whether the urgently needed recapitalization of the Greek banking system will go through as soon as described in the bailout agreement. More generally, the bailout agreement requires the Greek parliament to vote in hundreds of new laws in the years to come. The domestic political calendar is helpful: The next scheduled electoral contest in Greece (local and European elections) does not come before the summer of 2019, when the four-year term of the newly elected parliament will be running out anyway.

3. What is Tsipras' leverage in negotiations with Greece's creditors?

The election result has shown that Tsipras remains the dominant figure in Greek politics. Greece's creditors probably knew already that the difficult measures to come would have a bigger chance of being implemented without social unrest if Syriza (and Tsipras personally) were involved in government. In other words, Tsipras is essential for the success of the bailout. On the other hand, even though he might still be tempted to shake things up, Tsipras's room for maneuver is more curtailed than before. Syriza and ANEL's "victory" amounted to the two parties losing more than 300,000 votes combined since January. The record abstention rate shows that Greeks have grown tired of the hyper-politicization of the last months. The best-case scenario is that Tsipras recognizes that his stature depends to a significant degree on the effective management of the economy, while Greece's creditors reward him accordingly in key junctures (for example on the question of Greece's debt).

4. What are the prospects for the Greek economy?

Not particularly bright. The previous five years of bailouts under pro-European parties saw them implementing austerity while doing very little to upset vested interests and partisan clienteles. Alexis Tsipras has promised to "break the old system," but it's uncertain whether what he means by that is really what the Greek economy needs—scaling back red tape and ending the extraction of resources away from the productive economy and towards well-connected and subsidized groups. Under New Democracy and PASOK, reforms mostly amounted to finding more inventive ways to tax the economy in order to close the deficits of the public sector, while structural reforms were being watered down or never fully implemented. The result was long-standing stagnation, even if Greece stayed in the eurozone. Expect more of the same under Syriza and ANEL.

5. Will Greece ever repay its debts?

The best-case scenario (effective reform in exchange for debt relief) is less likely than the stagnation scenario (lackluster reform and low-intensity friction with the eurozone). Greece's third bailout is set to expire in the summer of 2018—a year before the scheduled completion of the new government's term. In theory, Alexis Tsipras could plan for a successful implementation and completion of the bailout by that time, allowing the Greek economy to grow and Greece to be able to borrow again from the financial markets without eurozone support. He could then reap the benefits of this success in the 2019 elections. But given Syriza's ideological DNA, Tsipras's character and the nature of the Greek political system, things are unlikely to unfold this smoothly. Tsipras will be forced on several occasions to balance his commitment to the bailout against satisfying constituencies that will object to its implementation. Syriza and ANEL's parliamentary groupings are more cohesive than before, but the coalition still only commands a four-seat majority in parliament. The EU may again find itself confronted with renewed Greek demands coming on the heels of weak implementation of the bailout. Greece and Europe may well sleepwalk again to a Greek exit from the euro.

Angelos Chryssogelos is Academy Senior Fellow on the Europe Programme at Chatham House.