Remember the Greek crisis? Last time we checked in, a newly mandated Greek government reached an agreement with creditors and the country was on its way to recovery, or at least stability. Well, not exactly.

Several days in Athens spent talking with investors, business leaders and government officials last week made it clear to me that the chances of a fatal misstep remain high. While Prime Minister Alexis Tsipras got approval for his 2016 budget – narrowly, after 153 lawmakers backed the budget, with 145 parliamentarians voting against and two abstentions – the challenges ahead make his previous Houdini acts (especially ignoring the result of his own referendum) look easy.

The budget calls for selling state-owned assets, reforming public-sector wages, dealing with bad loans at the nation's banks and fixing a broken pensions system. Any one of these could prove unpalatable to the Greek parliament and trigger a renewed crisis. Trying to pin officials down on precise dates for implementing these reforms is an exercise in futility. So here are five ticking time-bombs that lie ahead for Greece in the coming weeks.

1. Non-performing loans

The percentage of Greek loans that aren't being repaid, including mortgages, consumer debt and company loans, is more than 48 percent, according to an October report by the European Central Bank. No wonder Greek bank stocks have lost 95 percent of their value this year.

The government plans to introduce laws that will allow banks to outsource the management of their non-performing loans, and establish a structure so that they can be sold off in bundles to third parties. "There are a lot of private equity funds visiting Greece," Aristides Xenofos, who heads the Hellenic Financial Stability Fund that's responsible for keeping the banking system afloat, told me. "They do realise there is some hidden value in the NPL books of the banks."



That sounds promising, although it's not clear whether the laws have to be in place by the middle of this month (as Greece's creditors seem to want), or whether concrete proposals suffice (according to Greek officials). When the ruling Syriza party was in opposition, it vehemently opposed allowing debts to be transferred to what it called "vulture funds," leaving some to wonder if there will be foot-dragging now. Moreover, even though banks won't be able to sell mortgages on primary residences, it's likely there will be a storm of protest at the prospect of third parties harrying homeowners to meet their obligations.

2. Pension reforms

Everyone agrees that with Greek unemployment averaging more than 25 percent this year, the current pensions system is unsustainable. There aren't enough people paying in, and a jobless rate that's been above 20 percent for more than four years risks creating an underclass of people who've never contributed and will never qualify. Many households are currently dependent on the pension income of a single family member to stay financially afloat.

A senior government minister told me that rather than cut benefits, the proposed solution is to ask existing workers and employers to increase their contributions. He acknowledged that there's already a big problem with employers failing to register workers whom they pay under the table, to avoid meeting pension obligations; nevertheless, he says the government isn’t willing to cut payments to pensioners and risk stoking political instability.



The official insisted that the terms of its most recent bailout demand only that it achieve savings worth 1 percent of gross domestic product, with no requirement to overhaul the system. That hardly seems to reflect the spirit of what's needed, even if it technically follows the letter of the accord.

3. Privatizations

In July, the government promised a "significantly scaled-up privatization program" to generate 50 billion euros ($54 billion) of proceeds. Thus far, there's little evidence of progress, although officials insist that agreements on selling ports and local airports are on the verge of completion.

Giorgos Chouliarakis, Greece's alternate minister of finance, says the government will produce a "detailed action plan" on state asset sales by the middle of this month, but that the rules will forbid what he called "fire sales." Unfortunately, given the state of the Greek economy, all asset sales are effectively fire sales.

Moreover, Chouliarakis suggested a model that would set the value of state-owned assets at what they would be worth if the economy wasn't in a tailspin. That's unrealistic in the current climate. If the government doesn't lower its expectations, the pace of privatizations will continue to disappoint its creditors.

4. Capital controls and the banks

An American I met in Athens last week was joking about how many Greek bank shares he could buy for the price of a New York subway ticket. But if you're a Greek taxpayer, it's not funny; the money the government put into the banks has effectively disappeared. Shares of Piraeus Bank, for example, trade at 65 euro cents; a year ago, they were worth 134 euros apiece. Its market capitalization is 39 million euros, down from more than 8 billion euros.

At their September 2009 peak, Greek banks held customer deposits worth almost 240 billion euros. Since the crisis erupted, almost half of that money has fled the financial system, disappearing either under mattresses or into overseas accounts. Unless a chunk of that money returns, the banking system will remain fractured and fragile.

The government has just completed the third round of recapitalizations for the banks; officials say they hope more capital won't be needed, but none of those I encountered sounded very sure. With capital controls about to be lifted, depositors will vote with their euros as to whether they're willing to trust the domestic financial system with their money.

5. Debt relief

The good news is that Greek officials are being pragmatic about what's achievable on the debt-relief front. The not-so- good news is they'll still want to come back from Brussels with something they can sell to their voters. Rather than pushing to write off some of the face value of the debt – a "haircut," in bond market jargon – Greece's government is likely to accept delayed repayment of principal, although it also wants even lower interest rates. (One senior Greek minister even says that the International Monetary Fund is doing Greece a disservice by harping on about haircuts.)

Provided progress on bad debts, state asset sales and pensions can be achieved, Greece's lenders should concede the point. But if renewed hostilities break out between the county and its creditors, the government may have to accept that further debt relief won't be forthcoming – and somehow persuade its already disenchanted electorate to accept that failure.

For most financial market participants, the risk of another Greek crisis is high on the list of "known unknowns" for 2016. It may all be fine; it's certainly clear that Greek officials have looked into the abyss and have decided they prefer the constraints of euro membership. But with so many policy measures to implement in such a short space of time, it would be premature to retire the word "Grexit" just yet.

[Bloomberg]