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ESM Chief Regling Says Tsipras Mistakes Cost Greece 200B Euros

August 20, 2018

European Stability Mechanism (ESM) Managing Director Klaus Regling, whose agency was part of the Troika providing Greece with bailouts said Prime Minister and Radical Left SYRIZA leader Alexis Tsipras’ coalition cost the country up to 200 billion euros ($228.08 billion) by delaying reforms agreed with previous governments before finally consenting.

The ESM joined with the European Union and European Central Bank to give Greece a third rescue package in the summer of 2015, this one for 86 billion euros ($98.07 billion) that Tsipras said he would never seek nor accept because it came with more crushing austerity measures he swore to reject but instead implemented.

After taking office in January, 2015, his government, when Yannis Varoufakis was Finance Minister, embarked on a defiant policy of challenging the creditors, which at the time also included the Washington, D.C.-based International Monetary Fund (IMF).

When that led to Greece losing the ability to borrow from the EU’s bank, Tsipras ousted Varoufakis, replaced him with a compliant Euclid Tsakalotos as finance chief, and surrendered to the Troika.

But the damage had all been done, said Regling, who wrote in the newspaper Kathimerini that it was a costly tactic, with the bailouts ending on Aug. 20 but the economy needing monitoring for years to make sure fiscal targets are hit and there’s no backsliding on reforms and more austerity.

“Greece not only suspended but overturned the reforms (taken to date) in the first half of 2015, a development costing up to 200 billion euros,” he said.

Despite that, he said the country is now on the right course because Tsipras backed down, if too late to prevent a higher cost that will burden future generations with the bailout payment schedule not ending until 2060.

In July, Regling warned there could be no let-up on reforms and austerity, with Tsipras trying to wiggle out of more pension cuts due to begin Jan. 1, 2019, an election year, with polls showing he’s plummeted in popularity after breaking his vow to help workers, pensioners and the poor.

Regling said if Tsipras tries to backtrack on the lenders as he did in reneging on vows to reverse austerity measures that a recently-concluded debt relief deal to provide a longer repayment period on the loans would be suspended.

He said it took Greece more than eight years to emerge from an economic and austerity crisis because of the weak government administration and Tsipras reversing some reforms accepted by an earlier government when he took office in January 2015.

There are three reasons it took Greece more time to emerge from the programs: the deep crisis in Greece from the outset, the weaker administration in Greece than in other Eurozone states, and because Tsipras reversed some reforms agreed by earlier governments.

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