After Eight Years, Greece’s Bailouts Set to End, But Not Austerity

FILE - Greek Prime Minister Alexis Tsipras removes his tie at the end of his speech to lawmakers from his left-led governing coalition in Athens, on Friday, June 22, 2018. (AP Photo/Petros Giannakouris)

ATHENS – More than eight years after then-Prime Minister and former PASOK Socialist leader George Papandreou asked for a bailout – that turned into three for 326 billion euros ($380.86 billion) – the monies will run out on Aug. 20, leaving Greece to the mercy of the markets.

Prime Minister and Radical Left SYRIZA leader Alexis Tsipras’ boast there would be a “clean exit,” were dashed when the country’s international creditors, the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) and the Washington, D.C.-based International Monetary Fund (IMF) said the country’s economy would need monitoring for years to make sure there’s no backsliding on reforms and more austerity.

Tsipras, in return for a third rescue package in the summer of 2015 for 86 billion euros ($100.47 billion) he said he would never seek nor accept, agreed to more brutal measures on workers, pensioners and the poor he said he would save but then hit with more austerity.

Two test bond sales of 3 billion euros ($3.5 billion) were sold in the last year but at interest rates more than three times higher than the bailouts – before Greece struck a deal for debt relief and a longer time to repay.

The economic crisis has seen Greece’s economy shrink some 25 percent but Tsipras said he’s bringing a recovery without mentioning, if so, it’s because he reneged on anti-austerity promises and surrendered to the creditors.

An official who was not identified told the financial news agency Bloomberg that the goal now is have a plan by the end of the year for returning fully to the markets, ahead of more pension cuts in 2019 and first-time taxes in 2020 on previously exempt low-and-moderate income individuals and families.
The target is for the country to issue no more debt than what matures each year, the official said.
In 2019 – an election year, with polls showing Tsipras is far behind the party he ousted, the major rival New Democracy Conservatives – debt maturities are around 10-11 billion euros ($11.7-$12.9 billion) while for the following two years the amount falls to 5 billion euros ($5.84 billion,) according to Public Debt Management Agency data.

This also means that Greece will not have to issue more than two or three notes a year, and if there is a need for more, then the nation can re-open a previous issuance, the official said.

“There is still work to be done in order to regain investor confidence and full access to the markets,” Dimitris Dalipis, head of fixed income at Alpha Trust Mutual Fund Management in Athens told the news agency. “However, progress has been made and the market is appreciating this as is evident by price movements following the June 21 Eurozone agreement,” he said.

The plan for a sustainable return to markets depends on Tsipras’ coalition sticking to its promises, with a track record of reneging and as he’s already frantically trying to wiggle out from the next round of pension cuts.

There’s also the political challenge of his government falling apart with its junior partner, the pro-austerity, marginal, jingoistic Independent Greeks (ANEL) of Defense Minister Panos Kammenos opposing SYRIZA’s deal to rename the Former Yugoslav Republic of Macedonia (FYROM) as North Macedonia, giving away the name of an ancient Greek province.

If approved in FYROM ultimately it would then come before the Greek Parliament, most probably early in 2019 with elections required to be held by October.

“A combination of internal and external risks could hurt Greece’s market access over the coming months,” Mujtaba Rahman, managing director at Eurasia Group in London told Bloomberg. “The politics around the Macedonia deal will keep the possibility of a government collapse or an early election on the table” while “from Europe, the impending standoff between the European Union and Italy over Rome’s budget could, in a tail scenario, present spillover risks to Greece,” he said.

Tsipras hopes to lure more foreign investors but elements in his party are fighting that, opposing any foreign businesses in Greece although he has accelerated the sale of state assets after saying he would stop them.