ATHENS – There will no end to austerity, but Greece has getting the last installment, this one for 15 billion euros ($17.3 billion) as eight years of international bailouts are set to expire on Aug. 20, leaving the country at the mercy of the markets after a cash buffer runs out.
The last payment came after weeks of delays in Germany, which is putting up the bulk of 326 billion euros ($377.47 billion) in three rescue packages that began in 2010 when then-Premier and PASOK Socialist leader George Papandreou, after saying, “The money is there,” found out it wasn’t and asked for a first bailout of 110 billion euros ($127.37 billion) that came with harsh austerity measures.
When that wasn’t enough, Greece – under New Democracy, which opposed austerity while out of power, agreed to more to get a second bailout of 130 billion euros ($150.52 billion).
Ruling Radical Left SYRIZA leader and Prime Minister Alexis Tsipras, swearing he would defy the creditors, instead in Aug. 2015 sought and accepted a third, for 86 billion euros ($99.58 billion), breaking anti-austerity vows and becoming the next Greek leader to surrender to 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).
With two test bonds of 3 billion euros ($3.47 billion) having sold in the last year – but at interest rates more than three times higher than the bailouts, before a debt relief deal was recently struck showed the cost of relying on private investors could be high.
Tsipras’ claim of a so-called “Clean Exit” from the bailouts was shot down by the creditors who said the country’s economy would need continued monitoring for years to make sure fiscal targets are met and there’s no reneging on reforms as he did on anti-austerity vows.
The ESM said 9.5 billion euros (nearly $11 billion) of the loan would go toward a cash buffer Greece could use to meet its financial needs for almost two years, although Bank of Greece Governor Yannis Stournaras has recommended a precautionary line of credit.
The other 5.5 billion euros ($6.4 billion) was earmarked for paying off some of the country’s considerable debt. The Greek government hailed the payment as “the last act of the bailout drama.”
“Greece can now begin a new page of progress, justice and growth,” Tsipras’ office said in a statement as he doesn’t meet reporters nor hold news conferences to avoid taking questions. “We face a lot of work ahead, but also a new prospect, at last, for the majority” of the Greek people, it said, although the harsh measures he agreed to hit the majority of the Greek people.
The cash buffer means the government won’t be in a hurry to go to the markets, given the country’s sub-investment grade credit rating and the high rates private investors would demand on loans.
ESM Managing Director Klaus Regling said the disbursement showed “Greece has come a long way” in managing the bailout and that “the commitment and hard work of the Greek people are now paying off,” although the rich, tax cheats and politicians have largely avoided sacrifice while workers, pensioners and the poor were repeatedly pounded.
In mid-July, Germany objected to immediate payment of the final installment, claiming Greece had not met all the requirements. Chancellor Angela Merkel, in return for her support and German loans, insisted and got Draconian measures put on Greeks.
With the installment, Greece has a cash cushion of some 24 billion euros ($25.47 billion), enough to cover the country’s needs for about 22 months as more pension cuts are due to kick in on Jan. 1, 2019 – an election year, with polls showing Tsipras will pay a punishing price for breaking his promises.
(Material from the Associated Press was used in this report)