Alexis Tsipras's government has been forced into a policy U-turn entailing more spending cuts
Greece’s stock market rallied on news that Greece and its creditors have reached an outline agreement over an €86-billion bailout. Athens’s benchmark ATG equity index closed up 2.1%, while the country’s banking index also climbed 3%, although they remain down 15% and nearly 70% respectively since the start of 2015. Under the terms of the bailout, Greece’s struggling banks would get an immediate €10-billion and be recapitalised by the end of 2015, a government statement said.
Greek Prime Minister Alexis Tsipras called an emergency session, interrupting Parliament’s recess, last week to vote on Greece’s third financial rescue in five years.
Tsipras said he wanted a draft law on the deal discussed in committee last Wednesday so it could be ratified by Parliament on Thursday and approved at a eurozone finance ministers’ meeting on Friday. The package’s first tranche will be paid in time for Greece to make a €3.2-billion payment to the European Central Bank by August 20.
If approved, the agreement will close aid talks for Greece that began in January with the election of Tsipras’s leftist Syriza party, which swept to victory on an anti-austerity platform.
But the government has been forced into a policy U-turn entailing more spending cuts, among other austerity measures. By accepting the agreement’s harsh terms, critics say, Syriza has compromised most of the principles it stands for.
“Left-wing governments should take left-wing actions,” said Costas Lapavitsas, a leading member of a bloc of dissident Syriza MPs who called the package a “noose around the neck of the Greek people”.
Besides selling some state property and cutting pensions, military spending and tax credits for vulnerable people, these measures include energy market deregulation, changes to tonnage tax for shipping, pharmaceutical price cuts, reviewing social welfare, phasing out early retirement and implementing the Organisation for Economic Co-operation and Development’s market reforms.
Greece has relied on bailouts totalling €240-billion from eurozone members and the International Monetary Fund since 2010, with successive governments forced to implement increasingly punishing spending cuts, tax rises and reforms.
While budget overspending has been reduced, the austerity measures have plunged the country into a deep downturn and pushed unemployment to a record high of 26%.
The government insisted it had won key concessions in the deal, pointing to a deficit target of 0.25% this year followed by a surplus of 0.5% next year, which it said was less ambitious than creditors had originally demanded and would spare Greece €20-billion in budget cuts.
“This practically means with the current agreement, there will be no fiscal burden – in other words, new measures in the immediate future,” the government statement said.
But mounting discontent in his own party, which now has only a nominal majority in Parliament, has fuelled speculation that Tsipras will call early elections once the new deal is signed, possibly in the autumn.
Meanwhile, a fund manager said one key measure, a €50-billion privatisation programme, could attract investors. “While institutional investors may be a little shy of investing in Greece in the near future, the world is full of capital seeking out distressed opportunities. The proposed Greek privatisation programme may well provide an appropriate way to incentivise capital to re-enter the country,” said Ali Miremadi, at London’s Taube Hodson Stonex. – © Guardian News & Media 2015