By Simon Nixon 

Greece has a new debt deal -- but then it was always going to get a new debt deal.

Time and again, the eurozone has demonstrated that it is bound together by impressive reservoirs of political will: not only the will of debtors such as the Greeks, for whom the euro is both a trusted store of value and a symbol of their common European destiny, but also the will of creditors, who have been unwilling to risk the great costs and inevitable political upheavals of a eurozone breakup. Indeed, the determination to reach a deal was even greater at a time the breakup of the European Union itself is on the table in the U.K.'s Brexit referendum.

Even so, the deal agreed on Tuesday night is hardly the decisive break in the Greek debt crisis originally envisaged under the bailout deal thrashed out last summer. By now, Athens was supposed to have undertaken far-reaching reforms of its tax and pension system, the eurozone to have delivered meaningful debt relief, and the International Monetary Fund to have agreed to help finance the program.

Instead, Greece has promised to tackle the reforms "if needed" to hit its 2018 budget target, the eurozone will deliver the debt relief "if needed" when the program ends in 2018, and the IMF will join the program by the end of this year, subject to technical clarifications. This is a classic euro-fudge, whose purpose is to kick the can decisively down the road, deferring the grittiest political decisions until 2017 and 2018.

The big winner is Greek Prime Minister Alexis Tsipras, who was swept to power 18 months ago vowing to resist reforms to the country's inefficient public administration and its unaffordably generous pension system. He has again succeeded in shielding his electoral base from cuts that the IMF has long insisted were essential to put Greece's finances on a sustainable footing.

His decision to prioritize preserving public sector and pensioner privileges over immediate debt relief exposes the long-running debate over debt relief for what it always was: a second-order issue whipped up for the benefit of international opinion to distract attention from the Greek government's long-running reluctance to reform.

The deal is also a partial win for German finance minister Wolfgang Schäuble. True, he will now have to cross a red line by asking the Bundestag to disburse a further EUR10 billion ($11.2 billion) of bailout loans to Greece without the IMF fully on board.

But he has at least succeeded in postponing detailed decisions on debt relief until after the German elections in 2018, while at the same time ensuring that any debt relief remains contingent on Athens fully complying with its program. That could point to future trouble if Athens fails to hit its budget targets, which seems plausible given it has chosen once again to try to achieve those targets by piling yet more taxes on the same narrow base.

On the face of it, the deal is a defeat for the IMF, which appears again to have buckled under pressure from U.S. and European governments on its board into giving its blessing to a flawed deal.

But that is not quite right. The IMF resisted intense eurozone pressure to give an unconditional commitment to join the bailout. That won't happen until it is satisfied that the eurozone is committed to putting Greece's debt on what it considers a sustainable footing by the end of the program.

That may require the eurozone to make further politically unpalatable concessions, not least because the IMF will base its own debt sustainability analysis on an assumption that Greece is incapable of achieving a budget surplus before interest payments above 1.5%, whereas the eurozone program continues to envisage a surplus of 3.5%.

In fact, the real losers are the Greek people, particularly younger citizens who are likely to continue to pay the price for Athens's political choices. This deal will certainly allow Greece a much-needed period of stability and should lead to a significant easing of financial conditions as the government clears its arrears and the banks gain access to cheaper European Central Bank funding.

Athens also has committed to some reforms that should improve the business environment and boost confidence, including to the way banks deal with bad loans and to the welfare and tax systems. But Mr. Tsipras's reluctance to embrace radical reform of Greece's failed economic model points to an underwhelming recovery.

On the other hand, the deal buys time for Mr. Tsipras to embark on his own more gradual process of reform. One reason Berlin softened its approach was that Greek finance minister Euclid Tsakolotos convinced Mr. Schäuble that he recognized the long-term need for radical tax and pension reform, even if he didn't believe it was politically possible to deliver it in the time that the IMF was demanding, according to people familiar with his thinking.

What is certain is that having secured this deal, Mr. Tsipras and Mr. Tsakolotos can no longer hide behind the legacy of their predecessors. Eurozone taxpayers have effectively agreed to absorb the bill for last year's ruinous stand-off. Greece's fate now lies in Athens's hands. If this deal fails, the Greek people will know whom to blame.

(END) Dow Jones Newswires

May 25, 2016 17:27 ET (21:27 GMT)