×

Don't bet on a happy new year for Greece

It's been something of an "annus horribilis" for Greece, with the country brought close to financial ruin and leaving the euro zone in summer. Capital controls are still in place and next year could bring more political and economic volatility, analysts believe.

Elections in January brought Syriza to power. The radical left anti-austerity grassroots movement promised to oppose government spending cuts at all costs.

But after months of tortuous negotiations with international lenders, anti-European rhetoric and a referendum on opposing austerity, Greece's ruling party did a U-turn in summer. It capitulated to lenders' demands for even more austerity in return for a third bailout package.

In total, Greece's three bailouts since 2010 have seen the country receive almost 330 billion euros ($349.6 billion) in aid from the bodies overseeing it: the European Central Bank, European Commission and international Monetary Fund (IMF).

Muddying the waters with lenders, however, Tsipras appeared to be pushing for the IMF to stay out of the country's latest bailout, telling the Financial Times newspaper at the weekend that he was "puzzled by the unconstructive attitude of the fund on fiscal and financial issues."

A Greek flag during a pro-government rally in front of the parliament building in Athens, Greece, June 21, 2015.
Yannis Behrakis | Reuters
A Greek flag during a pro-government rally in front of the parliament building in Athens, Greece, June 21, 2015.

He indicated that the IMF should leave his country's third bailout to the euro zone when it decides whether to stay involved early next year. "We think that after six years of managing in extraordinary crisis, Europe now has the institutional capacity to deal successfully with intra-European issues."

Lack of strategy

The issue of debt forgiveness still remains, however, with many (including the IMF) saying that without debt restructuring, Greece's economy will not be able to get back on its feet. The IMF predict that Greece's economy will shrink by 1.3 percent in 2016 and that unemployment would remain high, at 27.1 percent

"Fundamentally, Greece lacks a growth strategy or even a strategy more broadly," Raoul Ruparel, co-director of London-based think tank Open Europe, told CNBC last week.

"The government is passing the necessary reforms but it does not support them or buy into them. Questions necessarily arise whether these reforms are actually going to be implemented. There is still a huge amount to be done to improve the business climate in Greece. Currently the government is caught between not buying into the euro zone strategy but not having any other option."

Read MoreAwkward! It's tough being rich in Greece

Improvements 'limited', volatility ahead

While lenders are drip-feeding Greece more money to keep it afloat, capital controls remain in place and are predicted to remain in place until at least the second half of 2016. The elephant in the room remains: will this third bailout even work?

Ruparel from Open Europe was skeptical, saying it was "not clear this bailout will work where others have failed."

"Much of early 2016 will focus on discussion around debt relief. This has become probably more politically important than economically. The discussion will likely focus on extending the maturities of debt, providing grace periods to delay interest payments and maybe tie some repayment to GDP growth."

Winning battles, losing war

Greek Prime Minister Alexis Tsipras might have been dragged kicking and screaming towards a deal with lenders this summer, but the embattled leader is nothing if not resilient, having then survived another general election in September which was effectively a vote of confidence in his leadership.

Despite having survived a year of fraught politics and economic turmoil, Tsipras has more challenges ahead with a very slim parliamentary majority (of 2) and a number of tough reforms to pass.

Read More'It's treason!' Greek anger at government u-turn

Public protests and strikes have also begun again in earnest and, to top it all off, Greece is the de facto gateway for thousands of desperate migrants fleeing war and poverty in the Middle East and Africa.

"Following the September elections, Tsipras' short honeymoon is over and full-blown disappointment is kicking in," Teneo Intelligence's managing director Wolfango Piccoli said in a note in December.

"Latest opinion polls indicate a sharp decline in support (estimated at 18.4 percent) for SYRIZA, with the obvious lack of any credible alternative being the only insurance policy currently saving Prime Minister Alexis Tsipras."

Political instability

Greece's lenders recently released a 1 billion euro tranche of money to Greece after a multi-bill of prior actions – measures the Greek government must implement according to lenders before money is released – was approved. There are still a number of reforms to be approved, however.

More unpopular measures, the IMF's demands (for debt sustainability) and Tsipras' thin majority risk a return to greater political instability early next year," Piccoli said.

"Various controversial measures, including reforms of the pension and tax systems and tax hikes for farmers, have been put off until January. In addition, the lenders have once again increased the government's leeway by agreeing to water down the content of other unpopular measures, including the sale of non-performing loans (NPLs) and the privatization of the power transmission operator ADMIE1," he said.

"The pledges of debt relief and Greece's inclusion in the ECB's QE program are powerful incentives for Tsipras to keep pushing, but it is difficult to see how his coalition could approve all of the required measures with its existing, thin majority, especially if the lenders' position toughens again," Piccoli added.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow CNBC International on Twitter and Facebook.