Greek Prime Minister Alexis Tsipras insisted on Monday that the priority of his newly re-elected government is to deliver on its bailout promises so that the country can start tapping international bond markets for money by 2017.
As a condition of July’s three-year 86 billion-euro bailout agreement the country’s third since 2010 Greece has to overhaul its economy by reforming its labour markets, raising taxes, cutting spending and putting state investments up for sale. If it doesn’t, Greece would not be able to tap the bailout funds and would again face the prospect of bankruptcy and an exit from the euro.
“This government, during its four-year mandate, will set its seal on the country’s final exit from the crisis,” Mr. Tsipras told lawmakers at the opening of a three-day parliamentary debate on his government’s policy platform, which ends with a confidence vote late Wednesday. “I know that the road ahead will not be easy... But at the same time this will be a period of hope.”
Greece will only have completely emerged from its crisis when it can independently and consistently borrow in international markets. Except for a brief period in 2014, it’s been unable to do so since 2010 when investors grew concerned about the country’s ability to service its sky-high debts.
“Over the next 20 crucial months ... our target is to have restored market liquidity, and regained market access,” Mr. Tsipras said.
Mr. Tsipras’ address comes just a couple of weeks after his left-wing Syriza party unexpectedly won the general election by a wide margin despite a series of U-turns that ended up with July’s bailout agreement. Following the election, Tsipras reformed his previous coalition government with the small, right-wing Independent Greeks.
As part of the bailout, his government has to enact more onerous spending cuts and tax hikes. According to Monday’s draft budget, these will be worth 4.35 billion euros in 2016.
Mr. Tsipras said his government has “a clear mandate” and that it will “start a series of reforms that will radically change Greece.”
There was an acknowledgement among Greece’s European creditors that Tsipras has altered considerably since he first got elected on an anti-austerity platform in January.
After Monday’s meeting of the eurozone’s 19 finance ministers in Luxembourg, the group’s top official, Jeroen Dijsselbloem, said the Greek government has changed tack since it agreed to bailout in July.
“Maintaining that attitude for reform is crucial to regain trust in and outside Greece, so crucial for economic recovery,” he said.
Mr. Dijsselbloem expressed his hope that the Greek government will get 2 billion euros in bailout cash by the middle of October once certain economic measures have been implemented. He said Greece should be able to get a further 1 billion euros at the end of the month, once the next set of measures is agreed.
Greece will then face a review to make sure it has implemented all the required measures. A positive first review is crucial as it will trigger the next phase in the country’s rescue cash injections for the crippled banks that could total 25 billion euros, and discussions on how to lighten Greece’s debt load.
“This will be perhaps the last chance to restore Greek banks to health,” Mr. Tsipras said.
Greece has relied on bailout funds from its eurozone partners and the International Monetary Fund since the spring of 2010 and is heading back into recession after painful controls on money transfers were imposed by the government in late June when it appeared headed for a euro exit.
According to the country’s draft budget, Greece’s economy will remain in recession through 2016. Economy Minister Giorgos Stathakis said later Monday that economic expansion is expected to start again in early 2017, adding that the recession might be much shallower than expected in the year before.
The budget forecasts also show unemployment rising steadily to 25.8 percent in 2016 and the debt burden at a staggering 192.4 per cent next year, an increase the government attributes to the planned bank recapitalization program.
The Greek government is hoping that abiding by the terms of its bailout will pave the way to debt relief in the form of longer repayment periods and lower interest rates on its bailout loans from fellow eurozone countries.
Because of Greece’s general election there are some concerns in the markets that Greece is behind schedule.
Wolfgang Schaeuble, the German finance minister who suggested earlier this year that Greece should be given a temporary opt-out from the euro currency, appeared conciliatory.
“It’s a little early to talk about delays. Rather, we will naturally await the first report and then we’ll see,” Mr. Schaeuble said.
