Greece's deep recession and unpredictable elections threaten to turn the biggest debt restructuring in history into yet another short-lived reprieve.
Last week's deal, under which private creditors agreed to lose most of their investments in Greek government bonds, should allow euro zone finance ministers to declare they will pay their part of a €130-billion bailout, Greece's second in two years. The International Monetary Fund will finalise its contribution later in the week.
The private sector debt swap lopped about €100 billion off Greece's debts but still leaves Athens as the euro zone's most indebted country and does not preclude a messier default or even a euro exit further down the line.
Greece's euro zone partners could be tempted to pull the aid plug if the winner of elections penciled in for late April or early May fails to reverse a poor track record on delivering reform.
"The debt swap deal does not solve the problems of Greece at all," said Holger Schmieding, chief economist at Berenberg Bank. "Of course, without it, Greece would be in huge trouble. But Greece's problem is that it has to return to growth. Otherwise, no debt burden is sustainable."
Greece's economy is estimated to have shrunk by about 15% since 2008, when it plunged into its deepest post-war recession, dragged down by tax hikes and wage and investment cuts meant to put public finances back on track. More than one in ten jobs have been destroyed.
Further belt-tightening agreed in return for a new EU/IMF bailout, such as slashing the minimum wage by a fifth, might tip the country deeper into recession and hit revenues, making it impossible to meet debt and deficit targets set by lenders as a condition for aid.
Besides, recession has been consistently worse than forecast by the EU and IMF.