One stress test is over for Athens, but several more are looming.

By Hugo Nixon, New York Times

Prime Minister Alexis Tsipras received good news over the weekend when a stress test showed that the top Greek banks needed to raise a lowish 14.4 billion euros, or $15.9 billion, in capital. But Mr. Tsipras has to implement more tough measures before he can get the economy growing. Until then, he faces political risks, which could yet tip Greece back into crisis.

The European Central Bank said that the National Bank of Greece would need to come up with €4.6 billion.Greek Lenders Told to Raise $15.9 Billion to Cover Bad LoansOCT. 31, 2015

The Greek government said Katerina Savvaidou failed to fulfill her duty to aggressively collect taxes and fight tax evasion.Top Greek Tax Official Is DismissedOCT. 22, 2015
An assessment by the European Central Bank found that the four banks — Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank — had a collective capital shortfall of €14.4 billion under an “adverse” scenario. This is less than the €25 billion maximum earmarked for bank recapitalization as part of Greece’s latest bailout program. What’s more, the banks will need to find perhaps around half that amount in state aid. The rest they can probably get by swapping bondholder debt into equity capital, issuing shares to private investors and selling assets.

What this means is that Greece’s overall debt may be €15 billion to €20 billion lower than earlier projections — peaking at a still eye-popping level of 190 percent of gross domestic product, rather than 200 percent.

The top four banks all stand a pretty good chance of raising the minimum capital required to avoid being effectively nationalized by the Greek state. To avoid that fate, they need to raise the entire capital shortfall identified under a “base case” stress test: €4.4 billion in total.

Provided the banks can find the necessary base-case capital themselves, the Greek state will provide whatever capital they can’t raise under the adverse scenario on relatively generous terms. It will use money borrowed from its eurozone partners to buy a mix of shares and contingent convertible bonds. The latter will not have votes and will turn into ordinary equity only if the banks’ capital buffers fall below a predetermined level in the future.

It is not certain that all four banks will be able to raise base-case capital privately. The biggest question mark hangs over Piraeus Bank, which has the largest base-case shortfall: €2.2 billion. After taking account of bond swaps and asset sales, it needs about €1.5 billion from private investors.

The main thing that could throw the capital increases off track would be signs that Athens is bogged down on other parts of the bailout program. If the banks then have to rely entirely on state aid, that won’t just increase Greek debt. It may push the whole recapitalization exercise beyond the year-end deadline — something that could result in uninsured depositors seeing part of their savings forcibly converted into bank shares under new rules that would then kick in.

Mr. Tsipras needs to keep running to avoid such a blow to confidence. And there are other reasons he can’t afford to relax.

Cash from the latest bailout program will flow only if Greece passes more milestones. The first €2 billion dollop of aid will be used partly to pay money Athens owes the private sector. Such a cash injection will help counteract the tax increases and spending cuts the government is having to implement.

But to get this money, Mr. Tsipras is supposed to implement 49 measures, including liberalization of closed professions and measures to crack down on tax evasion. So far, he is behind schedule and has done only about two-thirds of the work.

The biggest prize, though, is debt relief. The eurozone has agreed to consider lightening the load of Athens’s loans — probably by lengthening the period it has to repay what it owes. But it will start negotiations only when Greece receives a pass mark in the first review of the new bailout program.

To receive such a thumbs-up, Mr. Tsipras needs to implement a second raft of overhaul measures as well as agree to budget cuts for the next three years. Although the details haven’t yet been set, these are likely to be politically tough. For example, farmers will need to pay higher taxes, and big pension cuts will be required to compensate for a court ruling that declared previous reductions unconstitutional.

Athens is also supposed to strengthen the independence of its tax authority. Last month, Mr. Tsipras fired its boss.

The measures the government has pushed through are already causing a backlash. Farmers are threatening to bring their tractors into Athens, and pharmacists have been on strike. As the prime minister pushes through even more unpopular measures, some of his party’s members in Parliament may desert him and he could lose his wafer-thin majority. He might then struggle to put together a new coalition, because the opposition parties distrust him deeply.

Mr. Tsipras’s best bet is to move as fast as he can now. That way, the creditors may reward his actions, providing some relief before he faces yet more stress tests of his own.