Best Tsipras can hope for is lower interest on bailout loans

The new Greek government looks almost exactly like the last – and the challenge it faces is no different. Alexis Tsipras, reinstalled as premier after a second election in nine months, is now tasked with executing the very same kind of bailout terms he promised to repudiate when he first took office in January.

If this is take two for his Syriza movement then the defection of the most ardent naysayers may make it a little easier to implement the third rescue package for Athens. Crucial here is a successful conclusion of the first programme review, without which there will no talks on a new plan to ease some of the burden of the country’s mountainous debt. A decisive victory margin for Syriza suggests the odds are strong for the review. Still, the road thereafter is rocky.

Tsipras’s big bet is that he can – finally – deliver appreciable debt relief for the beleaguered Greeks. But we are still in the realm here of only modest potential gain.

His mishandled campaign for big debt reductions led to rejection and chaos. The best he might do now is to receive longer maturities on rescue loans from euro zone partners and interest rate cuts on the same debt. Given previous interest cuts, the scope for further reductions is limited. Yet new interest cuts would improve budget dynamics a little. This is crucial, for the Greek public finances bear deep scars from months of relentless turmoil.

No one believes the Greek debt is sustainable in the long run. In the absence of confidence and trust, however, it’s difficult to imagine anything approaching a fundamental rethink by Germany and the other euro zone lenders. Tsipras is not going anywhere. His second mandate provides a second chance to go again at the conundrum, albeit under pain of terms he would much rather reject. The same is true of the creditor camp. At this point, all sides know well that incremental progress is better than no progress and reversal.