Mervyn King, former governor of the Bank of England, was out and about the other day, warning in a German interview that underlying frailties in the euro zone are not yet resolved. The single currency remains at risk of breaking up, he told Handelsblatt.

King’s reflections are instructive. Professional alarmists have had a high time of it since the outbreak of the global crisis almost a decade ago, but alarmism is not the preserve of central bankers. They’re supposed to be the very enemies of alarmism, the kind of people who exude calm even in quicksand. So King cannot be seen to be indulging in rhetorical fancy.

“It has to be a risk,” he said of the danger of breakup. “All these temporary arrangements to keep the euro together will not last forever. And it is not obvious to me what plans people are putting in place to ensure its continuation.”

Such observations came as euro zone ministers gathered for yet another attempt to tackle the riddle of Greece.

In the backdrop was a deep schism between the euro zone creditors and the IMF which made a major play for immediate debt relief as a precondition for its continued participation in the Greek rescue. No such luck. A partial reprieve for Athens provides a route through a €7.5 billion funding gap next month, and another €2.8 billion for later obligations. While deeper debt relief was dangled before the country, it won’t happen before the middle of 2018. Baby steps only until then, and onerous fiscal targets to meet first.

Can it work? Don’t assume so. Hailed as a decisive breakthrough, the latest dead-of-night compromise merely postpones the most slippery questions over the Greek debt burden until well after federal elections in Germany next year.

Upfront concessions include a lowering of some interest payments and a smoothing of some debt repayments but average debt maturities remain unchanged. Progress of sorts. Yet Athens will have to wait for sharper measures, including the disbursement of profits on Greek bonds held by the European Central Bank and early partial repayments of expensive loans issued at the very outset of the rescue effort.

The eventual execution of such steps – and they are heavily conditional – is seen as a prelude to a longer-term but unspecified “contingency mechanism on debt” to confront any adverse developments.

Unrealistic goal

All of this was presented as a decisive step. Not for the first time in the Greek saga, however, implementation risk abounds.

For one thing, the country is still required to reach a 3.5 per cent primary budget surplus by 2018, which is a surplus in the public finances before debt servicing costs are met.

This undertaking is so ambitious as to raise immediate questions over its viability. In an unflinching review this week, the IMF said it was “unrealistic” to assume Greece could take measures equivalent to 4.5 per cent of economic output to bring the primary surplus into the 3.5 per cent zone.

Mountain to climb

“Even if Greece through a heroic effort could temporarily reach a surplus close to 3.5 per cent of GDP, few countries have managed to reach and sustain such high levels of primary balances for a decade or more, and it is highly unlikely that Greece can do so considering its still weak policy-making institutions and projections suggesting that unemployment will remain at double digits for several decades,” said the IMF.

Given all that has been since the first Greek explosion in the autumn of 2009, that is no exaggeration. Even on the basis that the 3.5 per cent primary surplus target is lowered after 2018, it still means Greece has a mountain to climb.

In a note, Douglas Renwick of Fitch rating agency said the delivery of conditional debt relief could incentivise Athens to reach targets. But he found there was still a risk that the 2018 objective would be missed. “This risk could increase if the conditionality . . . meant that sizeable debt relief came to be seen by Greek politicians or the public as a distant or unattainable prospect.”

This seems right. The debt burden on Greece is measured in scores of billions, with repayment over decades. Almost seven years after drama began, however, another two-year wait now seems to be in prospect. Politically convenient delay by creditors comes at economic and political expense for Greece. As Mr King said, albeit in a wider context, temporary arrangements do not last forever.