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EU Says Greek Bond Market Return Fragile, Warns No Austerity Backsliding

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(Photo by Eurokinissi/Tatiana Bolari, FILE)

ATHENS — With three international bailouts of 326 billion euros ($381.08 billion) expiring in August after eight years, Greece’s hoped-for return to the markets could be undermined by backtracking on austerity and reforms, the European Commission’s supervisor for the bailouts said.

Declan Costello cautioned Prime Minister and Radical Left SYRIZA leader Alexis Tsipras to stick to his promises after breaking anti-austerity vows once he took office in January, 2015 and imposed more crushing conditions on workers, pensioners and the poor he swore he would reject and overturn.

"It's clear that while Greece is coming out of the program — it has tentatively regained market access — that the situation remains fragile," Costello said.

"And it will be very, very important that Greece continues to demonstrate, not just in the period up to the end of the program, but actually in the critical period after the program, that reforms are on track,” he added.

The government is racing to complete a final list of reforms demanded by creditors over the next three weeks. It needs to do so before it can agree on the terms of post-bailout supervision and receive promised debt relief.

Tsipras keeps saying there will be a “clean exit” without scrutiny from the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) that put up a third bailout in the summer of 2015 for 86 billion euros ($100.53 billion) he said he would never seek nor accept but did both and then said it wasn’t his fault because he had no choice.

The Washington, D.C.-based International Monetary Fund, that took part in two earlier rescue packages totaling 240 billion euros ($280.55 billion) - the ESM stayed out - hasn’t joined the third deal.

Tsipras’ Finance Minister, Euclid Tsakalotos, a Marxist economist forced into embarrassing surrenders to bankers, has disputed him, saying the lenders will monitor the country’s economy for years or decades to insure the reforms are implemented.

In the last year Greece has successfully floated two test bond sales of 3 billion euros ($3.51 billion) each but at interest rates more than three times higher then for the bailouts, indicating relying on private investors could be costly, especially with Tsipras saying the bailout loans can’t be repaid without lower interest and a longer time to repay.

Costello said Greece could also be affected by the ongoing political turmoil in Italy which hasn’t been able to form a government, a worry also affecting Greek officials who are keeping an eye on developments there.

Tsipras is counting on another record tourism year, with some 32 million people - three times the country’s population - expected to visit and has agreed, after an earlier avalanche of tax hikes, to more pension cuts and first-time taxes on previously exempt low-and-middle income families and individuals while also reneging on promises to put a 75 percent tax on the rich, crush the oligarchy and hunt down tax cheats.

He has ignored a series of strikes and protests against his plans and claimed he’s bringing a recovery without mentioning, if so, it’s largely because he piled on more brutal measures after blaming previous governments for doing it.

The bailouts have done nothing to stop Greece’s debt from soaring, now a little below 180 percent of Gross Domestic Product (GDP) a level that Tsipras and many economic analysts said can’t be sustained and as it grows by the second.

(Material from the Associated Press was used in this report)