The elections add significant uncertainty to an economy ravaged by political and economic uncertainty. Tsipras' administration has been a disaster for the economy. Six months of fruitless negotiations were followed by closed banks, capital controls and very tight cash withdrawal limits. Consumption, as well as imports and exports (that mostly depend on imported raw materials), have fallen dramatically.
Layoffs and growing unemployment are expected in September, after the summer vacation. Banks' deposits and valuations have collapsed and they are in dire need of a new recapitalization. The previous infusion of EU money (borrowed by Greece) of 25 billion euros ($28 billion) is now worth only 2.5 billion. Investments of 11 billion by private parties in Greek banks are now worth only 2 billion.
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To top it all, Tsipras has repeatedly stated that he considers the agreement with the EU a result of blackmail, and that his heart is not in it. One wonders whether he will even implement this agreement.
Is there a way forward to recovery for Greece? Yes, but it is not being followed. The way forward is to have a coalition government of all the pro-European parties (New Democracy, center-right, Potami, center, Pasok, center-left, and the pro-European part of Syriza) that in fact voted for the agreement with the EU.
Such a strong coalition will first be able to negotiate more favorable terms of the EU agreement. Second, it will be able to implement it. The agreement aims at a significant reform of the Greek economy at the microeconomic level, including allowing free entry in "closed sectors" such as pharmacies, transportation and legal services, as well as privatizing ports, airports, and railroads. If the reforms are done, the Greek economy will grow and this will be the last bailout for Greece. If the reforms are not done, and unfortunately this is the most likely outcome if Tsipras is re-elected, we will see Greece asking for bailouts time and again.
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