Last weekend Greece held its general election, an election that was called by Prime Minister Alexis Tsipras after the approval of the last agreement between the EU and Greece. That deal was reached thanks to the votes of some parts of the Opposition, and after that, members of the Greek government had voted against it. Thus, Tsipras had no choice but to call fresh elections to ascertain if he still enjoyed the support of the electorate.

The party led by Tsipras got the highest number of votes but did not get enough seats in Parliament to avoid forming a coalition government. Where does this leave Greece and its efforts to put its public finances back in order and to kick-start its economy?

The initial reaction of the financial markets was negative, with Greek equities losing ground. However, Tsipras has emerged stronger from this election, even though he did not garner enough support to be able to lead a government which is not a coalition government.

He has a mandate to implement the reforms agreed to by the EU. The largest opposition party is in agreement with these reforms. The dissidents in his own party, who had set up another party, did not make an impact. So, Tsipras certainly has the moral authority to implement the agreed reforms.

This does not mean that there will not be problems down the line. Some form of debt restructuring, without any write-off of debt, will be required. However, that should be easier to achieve if the new Greek government shows it is intent on acting.

How the German government will handle the VW issue will set a precedent for the way the Greece issue will be handled in future

Creditors are expected to review the progress of reforms as part of the bailout next month, while the government will also have to draft the 2016 state budget, which would need approval of the EU. The reforms to be implemented include an overhaul of the pension system, raising a series of taxes, including on farmers, carrying out privatisations, merging social security funds and a bank recapitalisation programme.

It may seem that nothing was expected to change or that nothing has in fact changed. This mood explains the low turnout. As one voter was quoted saying: “Whoever is elected, the result will remain the same.” On the other hand, one expects to have more stability in Greece and once there is more stability, the country would eventually overcome its difficulties.

One may also argue whether at this stage Greece’s original lenders need to be made to suffer. A large chunk of the new bailout package will be going to pay back old loans. What will have happened is that the names of the creditors would have changed. When the original loans were issued, they were taken up by international banks that knew too well the risks involved. They were sophisticated investors, many of them being German bond-holding institutions. Given this situation, should they be given the protection that they have so far received or should they shoulder some of the burden?

I would like to tie this to the other major story of this week – the Volkswagen scandal. It needs to be stated at the outset that Volkswagen, as a car, is not any less safe than it used to be or we thought it was. What happened was an issue of governance and not of technical safety. Rules were not obeyed by one of the major companies of a country that expects others to obey the rules all the time.

Something in the mechanical/electrical/electronic system was fiddled to show a level of emissions that was lower than what it actually was. To achieve this there had to be someone who fiddled with the car, and so there was intent in whatever was done. Moreover, for an engineer to have fiddled with the car, there must have been approval to do so. This is why it is an issue of governance.

This incident will place Volkswagen in some financial difficulties. The government cannot just bail out Volkswagen, because EU rules do not allow it. What if the banks intervene in support of Volkswagen? Will the Bundesbank (the German Central Bank) or the Finance Minister, Wolfgang Schauble, who were so critical of Greece because they did not obey the rules, allow such an intervention? And if the German banks will eventually support Volkswagen, will they do so in the knowledge that the German government would eventually bail them out?

The old adage says that what is sauce for the goose is sauce for the gander. How the German government will handle the Volkswagen issue will set a precedent for the way the Greece issue will be handled in future. One hopes that in both cases sense will prevail.