Greek Election: Meet the New Boss…

Alexis Tsipras casts his ballot on Sunday, presumably voting for himself. Photo by Kostas Tsironis/Bloomberg via Getty Images.

Greece has a new government, and it is the same as the old government. Yes, Sunday's election was supposed to be a nail-biter, with Alexis Tsipras's leftist Syriza party-which ran the show from January to August-neck and neck with center-right New Democracy. Whichever party came first was supposed to have a Herculean task cobbling together a coalition with two or more other groups. But once again, the polls were wrong. Syriza cruised to victory with 35.5% of the vote and 145 of Parliament's 300 seats, trouncing New Democracy's 28% and 75 seats. By the time Tsipras gave his victory address, he had already informally renewed Syriza's coalition with the Independent Greeks, a small right-wing party polls projected wouldn't win a single seat (they got 10). So Greece gets some political stability just in time for its first bailout review with its "quartet" of creditors and negotiations on bank recapitalizations and debt restructuring. Good for Greece! This is an incremental positive for the eurozone, too, as it removes some short-term uncertainty. But Syriza must still pass and implement three years' worth of bailout-related legislation, which could break the government before its four-year term ends. So enjoy the stability for now, but don't think you have heard the last of Greece. Just remember, though, whatever ultimately happens, Greece remains too small and too firewalled to much impact global markets.

Since leading Syriza to victory in January, Tsipras has done the mother of all U-turns^[i]. As Bloomberg's Megan McArdle humorously summed it up: "In less than a year, Greece has gone from electing an anti-bailout firebrand to re-electing a pro-bailout incumbent." Adds her colleague, Matt Levine: "The joke is it's the same guy." Exit polls suggest most who voted for Syriza have moved past the whole firebrand anti-austerity thing and simply want to break with Greek politics' corrupt past. Whether rightly or wrongly, many see the traditional mainstream parties-New Democracy and former center-left stalwart PASOK-as in bed with the oligarchy and enabling the clientelism that pervades Greece's public sector and political system. Syriza might have failed to deliver on their earlier (and incompatible) campaign pledges of less austerity, debt relief and staying in the euro, but voters see them as the best chance to clean house and improve Greece's political institutions in the long run. Whether they will is another matter. Talk is cheap. But with the bailout basically pre-determining Greek legislation for the next three years, policy had very little to do with this election.

Paradoxically, though, policy will determine whether this government lasts. The quartet might have written Greece's legislative agenda, but Parliament still has to pass everything, and if they can't, the government won't last long. Despite Tsipras' strong showing and fresh mandate to see the program through, it will be a struggle. Many of the required laws were in Greece's first two bailouts but were never passed (or were amended into fecklessness), and it's an open question whether they will this time. Tsipras negotiated and signed bailout number three, but he has openly said he isn't a huge fan and has made noises about renegotiating certain parts, like pension reforms. Other Syriza lawmakers' follow-through could be even less enthusiastic. While most of the anti-austerity hardliners are out of the party and now out of Parliament^[ii], even some of Tsipras' more loyal backers have reportedly grown weary of the bailout. Should they or some members of the Independent Greeks rebel, PASOK has indicated they'll support Syriza from outside the government, but relying on opposition votes isn't a viable long-term strategy.

Plus, passing legislation is only the first step. Implementation is the kicker. Prior governments have passed tough laws that ultimately went nowhere, primarily due to ministerial inertia. It is one thing for Parliament to vote on public sector cuts. It is another for ministerial staff to hand out pink slips. Even institutional reform that doesn't involve head count could be a tall order, considering many ministries are staffed by people who benefit from the old way of doing things. Cushy civil service jobs were handed out as political favors for decades, building an entrenched opposition to institutional change. Same goes for privatizations. For all its promises, Greece has still privatized more heads of its privatization agency than state-owned assets.

On the bright side, the Syriza/Independent Greeks coalition should be more stable than the three-party coalition pre-election polls projected. Three's a crowd^[iii], and Syriza and the Independent Greeks have a history of working relatively smoothly together. With momentum in their corner, any struggles likely won't come to a head for another 12 to 18 months. That will be a welcome break from brinksmanship-for Greece, the eurozone and the world-but we suspect we haven't seen the last act yet.

If, or maybe more appropriately when, Grexit or Greek default or "there is a new anti-austerity party surging in Greece" fears resurge, perhaps remember 2015. This has been an odd year of many shifts within Greece politically and economically, yet overall the story is unchanged: A nation on Europe's periphery with a flair for political intrigue and drama that is too small to affect markets on its own and too firewalled to bring contagion.