Not So Fast: Stournaras Says Bailouts End Not the End

Bank of Greece Governor Yannis Stournaras. (AP Photo/Yorgos Karahalis, FILE)

ATHENS – Bank of Greece Governor Yannis Stournaras, a thorn in the side of the coalition government led by Prime Minister and Radical Left SYRIZA leader Alexis Tsipras, said the end of three international bailouts of 326 billion euros ($371.76 billion) on Aug. 20 isn’t the end of the country’s economic problems.

Stournaras told Kathimerini that Greece has “a long way to go,” with the loans not due to be paid off until 2060 and uncertainty about the cost of returning to the markets once a cash buffer of 9.5 billion euros ($10.83 billion) runs out, expected to last perhaps 22 months.

He said that while some reforms have been implemented to make Greece more competitive and improve how banks are run that the high public debt, bad loans held by banks, the notorious bureaucracy and the loss of many of the country’s best and brightest and youngest who fled to other countries seeking jobs and a better life would be a long-running burden.

He also warned, with Tsipras trying to wiggle out of more pension cuts due to begin Jan. 1, 2019, an election year with polls showing he’s far behind the party he unseated, the New Democracy Conservatives, after reneging on anti-austerity vows, there can’t be any backsliding on reforms.

“If we backtrack on what we have agreed, now or in the future, the markets will abandon us and we will not be able to refinance maturing loans on sustainable-debt terms,” he told the paper.

“If there is strong international turbulence, either in our neighboring Italy or Turkey or in the global economy, we will face difficulties in tapping markets given that the sensitivity coefficient of Greek bonds remains high,” Stournaras said, according to the paper and the news agency Reuters which also reported.

“We have a great deal of distance to still cover,” said Stournaras, who left a prestigious think tank to become finance minister in a New Democracy-led coalition and who has constantly punctured rosy claims by Tsipras and his government, which includes the pro-austerity, marginal, jingoistic Independent Greeks (ANEL) that all is well.

Stournaras said Greece’s punishing economic crisis was a result, primarily, of flawed economic policy decision-making over previous years as well, said the business newspaper Naftemporiki, and that three memoranda signed by successive governments with 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) were “part of the solution, not part of the problem” plaguing the country.

He said the third rescue package, for 86 billion euros ($98.07 billion) that Tsipras sought and accepted in the summer of 2015 after saying he wouldn’t, could have been avoided if the government had implemented reforms by the government Stournaras served.

“The differences separating the two sides (the Greek coalition government led by then-Premier and New Democracy leader Antonis Samaras and creditors) in the fall of 2014 were much smaller than the measures instituted later, under the third memorandum,” he stressed, while warning of the risk, as he said, of markets not wanting to invest if Tsipras backtracks on agreed-to reforms.

He said the huge public sector was a problem too especially with Tsipras hiring thousands of loyalists after saying he would stop patronage and its refusal to implement a system to evaluate the performance of employees in a sector known for laziness, inefficiency and bureaucracy.

Alternate Health Minister Pavlos Polakis, who has no experience in economics but has been a provocative loose cannon for the government, shot out that Stournaras should resign after slighting the government.

“We don’t need neither your forecasts, nor your advise (sic.) Your only contribution to this country now should be to resign!” Polakis said in a Facebook post. He accused the central banker of “belonging to the system that bankrupted the country and imposed memorandums,” without mentioning that Tsipras did too, after swearing he wouldn’t.