What many had predicted has now happened. Syriza, a radical left wing party, led by its charismatic leader Alexis Tsipras, has won the Greek election by a bigger margin than expected, even if Greece still needs a coalition government. Financial markets had factored in this victory and the likely turmoil that it might cause in Europe. Equities and the euro have experienced initial losses before making modest recoveries.

Syriza’s decisive win will affect not only Greece’s relations with the EU but also the governance of the eurozone. Tsipras was quick to announce in his victory speech that his party’s election meant “the end of austerity for Greece”.

Those who expected him to tone down his aggressive and populist rhetoric must have been disappointed. He still expects to renegotiate the bailout agreements signed by his predecessors and wants Greece to be relieved of half of its debt which today amounts to 175 per cent of economic output (GDP).

Only time will tell how the negotiations between the EU and Greece’s new prime minister will evolve in the coming weeks.

If Greece wants to remain a member of the eurozone, it will have to adopt a pragmatic approach because it is unreasonable to expect that the countries that helped bail it out, including Malta, will be prepared to write off half of their lending simply because the Greek people have decided they have had enough of austerity.

However, the troika (IMF, ECB and the European Commission), that deals with distressed eurozone countries, needs to understand that reducing a country to poverty and high unemployment simply to ensure that they adopt stricter fiscal policies can be counterproductive.

Many rightly argue that Greece has little chance of ever repaying its huge debts unless more favourable repayment terms are granted. The austerity programmewill continue to make it almost impossible for productive investment to beattracted to Greece. With no investment Greece’s unemployment will remain unacceptably high.

The dilemma facing the eurozone leaders, especially Germany, is the contagion that could result from the different possible scenarios that one could expect from the negotiations with the new Greek government. Italy, Portugal and Spain face similar problems to those faced by Greece, even if to a more modest extent. Populist parties in other countries look with interest and admiration to Syriza’s stance with the EU.

If Greece is forced to leave the Eurozone, as some analysts are predicting, financial markets are likely to punish eurozone economies. If the EU renegotiates the agreements with Greece and grants more favourable terms, this could lead to what the German finance minister has rightly termed “moral hazard”. Who would then blame Portugal, Spain, Ireland and possibly Italy if they were to ask for more concessions to lessen their burdens of austerity?

Malta may seem sheltered from these troubling developments in the eurozone. But the reality is that the Greek crisis is a global crisis that can shake the already weak confidence in the prospects of sustainable economic growth in 2015 and beyond.

What one hopes for in the short-term is a pragmatic approach to the resolution of the Greek crisis by the EU, making the burden on the Greek people a little more bearable. But in the long-term EU leaders must wake up to the reality that the governance of the eurozone needs a complete overhaul that would see fiscal, monetary and economic convergence become a reality.

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