Alexis Tsipras is returning to office as Greek prime minister after a victory in the weekend's general election. But economists warn the returning premier faces "massive challenges" and must begin the hard work on reforms without delay if the country is ever to recover.
Tsipras' leftwing party Syriza claimed 35.5 percent of the vote, seeing off the main conservative opposition party New Democracy on 28.2 percent, Reuters said. The interior ministry said that would give Syriza 145 seats in the 300-seat parliament.
Syriza is to form a coalition government with the rightwing Independent Greeks party, the party's junior partner in the previous government. The renewed deal would give the coalition a narrow majority of five seats.
The election came about after Tsipras quit in August as a result of internal party opposition to his decision to sign a third bailout deal with international lenders worth 85 billion euros ($96.2 billion) in July amid capital controls and near-bankruptcy in Greece.
The deal requires that Greece makes deep reforms and reaches tough economic targets and prompted both political and public anger that Tsipras had capitulated. The disillusion felt by the Greeks in the bailout process and politics – especially among those who voted against the bailout deal in the summer – was reflected in the turnout figures for Sunday's election: 55 percent.
However, speaking to cheering crowds in a central Athens square Sunday evening, Tspiras promised a period of stability and said he "felt vindicated" after quitting in August to start on a clean slate with voters, Reuters reported.
Giorgos Stathakis, former minister for economy, infrastructure, shipping and tourism for Syriza, told CNBC Monday that he was confident that Tsipras could implement reforms but Theodore Fessas, chairman of the Hellenic Federation of Enterprises, said no time could be wasted. "I hope the program will be implemented now," he told CNBC in Athens.
With his party divided and opponents on both right and left, Tsipras' election win on Sunday might be something of a pyrrhic victory with the uphill struggle to implementing reforms – including controversial pension and labor market reforms as well as tax hikes – ahead of him.
"The challenges that Tsipras faces are massive," Stefan Auer, associate professor and director of European Studies at the University of Hong Kong, told CNBC Monday.
"The main problem remains that no one wants to take ownership of this bailout deal and the reforms that are necessary. Tsipras made it clear that he doesn't like it, the public administration that needs to be reformed doesn't like it and pensioners won't like it," he said.
"The optimists would say this election strengthens Tsipras' chances of implementing reforms but the pessimists would point out that unless and until the Greek government are convinced that these reforms are needed, they will not succeed -- and I belong to the pessimists."
Fabio Balboni, European economist at HSBC, also agreed that Tsipras faced "many challenges ahead."
"The new government is likely to have a thin parliamentary majority and many challenges lie ahead: re-starting economic growth after the likely contraction in the third quarter, recapitalizing the banks, removing capital controls, completing the pension reform, and achieving much-needed debt re-profiling," he said in a note Monday.
While the reforms that Tsipras must carry out will tend to take center-stage over the next few weeks and months, talks between Greece and its lenders are likely to return to the thorny subject of debt forgiveness.
The debt to gross domestic product (GDP) ratio in Greece is the highest in the euro zone and is expected to hit 180.2 percent in 2015, according to the European Commission's forecasts.
While Greece and the International Monetary Fund (IMF) have said debt restructuring is crucial for Greece (and the IMF has said it won't participate in a third bailout without such leeway), Germany and others in the euro zone are reluctant to agree to give Greece more room to maneuver over debt, fearing that it could set a precedent for other indebted euro zone countries.
Senior economist at ING, Carsten Brezski, told CNBC that discussions over debt would have to take place sooner or later. "We still need to discuss the debt restructuring, that's the big issue," he told CNBC Europe's "Squawk Box" Monday.
"We do have the reforms and those are something that Tsipras will have to implement but the big issue is debt forgiveness and this is something that will come back on the European agenda."