ATHENS – New Prime Minister and New Democracy leader Kyriakos Mitsotakis, who promised to lure investors, cut taxes and bring a New Greece, may quickly find that uneasy lies the head that wears the crown as campaign promises run into a raft of challenges.
The 51-year-old son of the late former Premier Constantinos Mitsotakis has the background to deal with economic woes but there’s a long list of them and other difficulties awaiting him as he said his first priority would be to restart the long-stalled $8 billion development of the abandoned Hellenikon International Airport.
That had been stymied under former Premier and Radical Left SYRIZA leader Alexis Tsipras who was swept out of office by the same party whose coalition be brought down in January 2015 before falling out of favor for repeatedly reneging on anti-austerity promises.
In an analysis, the financial news agency Bloomberg said the former banker will have to balance making good on his vows with the math that shows it will be tough.
Mitsotakis’ government – he won 158 seats, enough to rule outright without a problematic and ideologically-opposed coalition partner – will come face-to-face with a mountain of bad loans burying banks and limiting lending, the notorious bureaucracy that bogs down progress, and convince investors to return after the Aug. 20, 2018 end of three international bailouts of 326 billion euros ($366.14 billion.)
Tsipras undercut that when a barrage of handouts in the form of pension bonuses and tax cuts in a bid to regain favor after he slashed benefits and raised taxes to satisfy the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM.)
The lenders in the summer of 2015 put up a third rescue package for Greece, this one for 86 billion euros ($96.59 billion) that Tsipras sought after swearing he wouldn’t because it came with more crushing measures he said he would reject but imposed.
He cut deep into a larger-than-expected primary surplus in what New Democracy said was a transparent if failed bid to buy votes, a common tactic by Greek political parties who fill public payrolls with patronage hires, a key reason for the 9 ½-year-long economic crisis.
While Greece is slowly recovering, it still needs foreign investors and Mitsotakis said he will bring them, starting with lowering the SYRIZA-set 29 percent corporate rate, and that he will cut through the red tape making it difficult to do business in Greece.
That’s a pledge made by every Premier, none of whom have been able to do it yet and he acknowledged a full recovery is not going to be as easy as a slick campaign slogan that rolls off the tongue before finding a bitter spot.
“The weight of responsibility is heavy,” Mitsotakis said in his victory speech in Athens. night. “I assume the burden with complete awareness of the situation the country is in.”
He added: “Starting tomorrow, the sky will be bluer and the sun will be brighter,” he said in Athens the night of his July win.. “A new day is dawning for the country.”
Greece’s economy expanded 1.9% in 2018 and is on track for about 2% growth this year, although Tsipras’ government had constantly predicted rosier figures. The Athens Stock Exchange general index has risen more than 20%, while yields on 10-year bonds have fallen to record lows. Greece is planning a new bond sale by the end of the month to capitalize on that momentum to secure sustainable access to financial markets that was lost in 2010.
Bloomberg outlined five top issues that Mitsotakis’ government will face, even before he names a Cabinet he said would be chock full of intellectuals and technocrats and not just recycled political figures with essentially no experience in their portfolios.
- Fiscal Stability
The country’s creditors want to send a clear message that it has to stick to its commitment of achieving a 3.5% primary surplus every year until 2022, although it now seems The European Commission estimates that the freebies will lead to a fiscal cost of 1% of Gross Domestic Product (GDP) for both 2019 and 2020, meaning that creditors may ask the new government for additional austerity measures. The Tsipras administration had said that after the new benefits, Greece would fulfill its promises for this year, but might miss the 2020 target by some 400 million euros ($452 million) to 600 million euros.
- Bad Loans
With 80 billion euros ($89.85 billion) in bad loans because many people couldn’t pay mortgages, credit cards and other obligations while crushed with pay cuts, tax hikes and slashed pensions, the banks – already bailed out once with 50 billion euros ($56.16 billion) from the bailouts – are still in a tough spot.
Among those bad loans is some 250 million euros ($280.78 million) owed by New Democracy and its former coalition partner, the now-defunct PASOK Socialists and the bank officers who approved them got immunity from prosecution but Mitsotakis hasn’t mentioned it yet.
The Greek benchmark banking index has risen 90% this year but investors worry that a failure to shrink bad loans may lead some banks to seek additional capital, Bloomberg said.
Mitsotakis wants to double Greece’s growth rate to 4 percent by next year – while juggling a lack of revenues, falling tourism after five consecutive record years and the inevitable demands of party loyalists who want the spoils of victory.
Besides starting Hellenikon, he said he’d give the green light to another project blocked by SYRIZA, a gold mine in northern Greece, and the Chinese company COSCO that runs the port of Piraeus wants to go-ahead on a $618 million overhaul, including a new mall.
- Powerless Public Power
Public Power Corp., Greece’s largest electricity provider, is in bad shape after SYRIZA had let people who couldn’t pay get off the hook and is struggling to stay afloat after losing more than 500 million euros ($561.56 million) in 2018. New Democracy Vice President Adonis Georgiades said in June. “It’s not just a company. If PPC fails, the country fails,’’ and he may be appointed Energy Minister to deal with it.
Greece’s next government must allow PPC “to act and operate as a company according to purely business criteria,’’ Chairman and Chief Executive Officer Emmanuel Panagiotakis told shareholders in late June, indicating the level of political intervention’s cost.
- Administration, Security
With anarchists running amok in Athens, SYRIZA customizing a bill to pave the way for the conditional release of jailed terrorist killers and anarchists, Mitsotakis said he would end asylum on university grounds that criminals are using for hide-out havens and cover.