German Paper Says Greece Facing Sanctions Over Tsipras Handouts

Photo by PM Press Office/ANDREA BONETTI.

Handing out pension bonuses and cutting taxes – partially reversing austerity measures he imposed – is helping Greek Prime Minister and Radical Left SYRIZA leader Alexis Tsipras in the polls but could bring sanctions from the country’s creditors.

That was reported by the German business newspaper Handelsblatt which said there is “heightened opposition” from the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) to what Tsipras is doing.

The Premier came to power in January, 2015 pledging to reverse austerity but implemented more, including an avalanche of tax hikes and new taxes, to get a third bailout that summer, for 86 billion euros ($95.76 billion.)

That came after the ratings agency Fitch’s said it was concerned about the economic effects of the handouts and giveaways, with the German paper saying there could be sanctions coming with fears Tsipras is reverting to the same pattern of wild spending that created a nine-year-long crisis.

The Paris-based Organization for Economic Cooperation and Development (OECD)also  joined Greece’s creditors in warning that election handouts could slow a burgeoning economic recovery.

“Deviations from the current medium-term fiscal strategy would undermine gains in fiscal credibility,” the OECD warned in its latest Economic Outlook report.

“Delays in reforms to improve the business environment, competitiveness and banks’ health would create downside risks to the projected recovery in investment,” it added.

The group said Greece’s economy is on a path to grow at slightly above 2 percent this year and in 2020 after shrinking some 25 percent from 2010 when the first of the bailouts began.

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Troika envoys reportedly weren’t briefed over the measures, with the first reactions showing worry that Tsipras is selling off a recovery to get back into power, setting back a coming rebound he claimed he was bringing.

The major opposition New Democracy said Tsipras was trying to “bribe” voters openly, particularly the elderly who’ve suffered repeated cuts. The handouts came days before the May 26 elections for the European Parliament and Greek municipalities as the Premier is trying to claw his way back into the race for the general elections later this year with polls showing the Conservatives will win.

“Tsipras passed the measures through Parliament last week. They took effect on Monday (May 20) just in time for the European election. The vote on Sunday (May 26) is considered as a crucial test for the national election, which must come no later than October,” Handelsblatt noted.

“SYRIZA is trailing New Democracy party in the opinion polls. Tsipras wants to improve his chances with campaign gifts, which however, burden the state budget with four billion euros (annually) from now on … the threat of a fiscal derailment now worries the markets,” the paper added.

The lenders, also including the Washington, D.C.-based International Monetary Fund (IMF) put up three bailouts of 326 billion euros ($363 billion) that expired Aug. 20, 2018 but they will continue to monitor the economy for years and could pull back debt relief measures if Tsipras’ handouts reverse any progress.