Many challenges remain for Syriza 2.0

After his very convincing victory, PM Tsipras is set to form a new coalition. At first glance, it seems as though the new government could have a longer life-expectancy than the last one. Yet, many challenges remain for Syriza 2.0.

In the coming weeks, the government will have to pass a long and painful list of bills, to meet all the requirements of the first bailout review, starting with the pension reform. The removal of capital controls and ECB purchases of Greek bonds are unlikely to happen in the near term, at least not until the recapitalisation of the banking sector has been finalised.This is more of a medium-term than a short-term issue, but Grexit risks remain elevated.

"Given the weakness of the Greek economy and the extent of the austerity programme, we believe that signs of reform fatigue will start materialising again, probably as soon as next summer, leading to political instability. To avoid a Grexit and give Greece hope of regaining market access and fiscal sovereignty before 2018, the current MoU would have to be redesigned to include not only a debt reprofiling but also a nominal haircut", says Societe Generale.