A barrage of handouts and tax cuts Prime Minister and Radical Left SYRIZA leader Alexis Tsipras dispensed in a bid to regain favor with voters as elections loom has the country’s European creditors worried fiscal goals will be missed, undermining a recovery.
The Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) which in the summer of 2015 put up a third bailout for Greece, for 86 billion euros ($97.01 billion) did nothing to stop him from doing it, however.
The lenders have some control over the reforms to which Tsipras agreed in return for the monies but said they didn’t want to interfere during a campaign period, including May 26 elections for the European Parliament and Greek municipalities with SYRIZA candidates taking a beating.
That led Tsipras to call July 7 snap elections with surveys showing he’s 7.7 points behind the major opposition New Democracy and no more handouts available in what his rivals said were just open bribes to buy votes.
Greece relied on three rescue packages of 326 billion euros ($367.74 billion,) including two in which the Washington, D.C.-based International Monetary Fund (IMF) took part, to stave off an economic meltdown.
Those came with attached harsh austerity measures Tsipras swore to reject and reverse but then imposed more, and as he’s been trying to wiggle out from under after plummeting in popularity for breaking his word.
The head of the Eurozone bailout fund, Klaus Regling, said the pension bonuses and tax cuts implemented by Tsipras, after the government slashed benefits and raised taxes, have put a 3.5 percent of Gross Domestic Product (GDP) primary surplus goal at risk, said Kathimerini.
That doesn’t include interest on the debt, the cost of running cities and towns, state enterprises, social security, some military expenditures and withholding payments to people and businesses owed money by the state.
CAN’T DO CAN DO
Tsipras had said that goal wasn’t possible but then said it was so he could use some of the money for the handouts that failed to win him back enough votes to stave off a disaster for SYRIZA in the May 26 elections.
Eurozone creditors and Greece agreed when the bailouts ended on Aug. 20, 2018 that the primary surplus of 3.5 percent would be kept until 2022 but Bank of Greece Gov. Yannis Stournaras, a SYRIZA critic, said that can’t be attained because of the handouts.
“We are concerned that the fiscal measures adopted last month put the fiscal target of the primary surplus of 3.5 percent of GDP at risk,” Regling told a news conference, as Tsipras said the goal would still be met without explaining how with all the money spent.
The package brought by Tsiras includes an annual payment for 2.5 million pensioners, a reduction in a sales tax on basic foodstuffs and a cut in tax rates on electricity and gas bills.
“Of course we are now in June, there is another six months to go, so we are talking about estimates here, but we are quite confident together with the Commision that this risk is really there, that the primary surplus might be missed by a significant margin,” Regling said.
“We are also concerned because the commitment to consult with the institutions on important fiscal measures was not adhered to ... which is clearly a breach of the agreed process,” he added.
“So we will come back to all these things with the new government,” he said, which could put New Democracy leader Kyriakos Mitsotakis in an immediate hot seat if he wins as expected and comes to power with an economic dilemma.