February 24, 2017
ATHENS, Greece (AP) — Greece’s era of austerity is over, Greek Prime Minister Alexis Tsipras claimed Friday, as he painted a positive picture of the reforms his government has agreed to take after the bailout program ends in 2018.
Speaking in parliament, Tsipras described the deal reached Monday as an “exceptional success” and said it showed the country’s creditors accepted Greece’s insistence that it could no longer bear further budget austerity.
“I am fully convinced we achieved an honorable compromise,” Tsipras said, adding that all sides at the eurozone finance ministers’ meeting in Brussels had agreed for the “first time after seven years … to leave the path of continued austerity behind us.”
On Monday, Greece agreed to legislate new reforms to come into effect in 2019, but said these will be fiscally neutral: for every euro’s worth of new burdens on the Greek taxpayer, an equal amount of relief will be granted.
In return, Greece’s creditors agreed to send their bailout inspectors back to Athens next week for further talks to complete a long overdue review of Greece’s progress in its bailout program. Greece’s central bank chief warned Friday that the bailout talks must be concluded as soon as possible.
“If the negotiations drag on with no agreement in sight, then Greece will enter a new cycle of uncertainty, deteriorating relations with our partners and creditors, and a backsliding of the economy into stagnation,” Yannis Stournaras said in a speech.
He warned that risks “also arise from delays and procrastination in implementing reforms already agreed on, or from distortions to competition that could hurt crucial sectors of the economy.” Fitch ratings agency left Greece’s credit rating unchanged at CCC, near the bottom of the rating scale and deep in junk bond territory. It said late Friday that despite risks from the delays in negotiations it expects an agreement will be reached.
“The current stand-off appears to be driven more by the … disagreement” between Greece’s European creditors and the International Monetary Fund on Greece’s debt sustainability, the agency said. “Relations between the Greek government and official creditors have stayed on a fairly firm footing” since Greece’s third bailout was signed in 2015, it added.
Tsipras said both the new measures requested by creditors and the government-proposed relief measures will be legislated at the same time. The prime minister’s left-led coalition government, trailing badly in polls, has presented Monday’s deal as a decisive, positive step forward for austerity-weary Greeks hammered by seven years of a financial crisis that plunged the country into an economic depression.
No details have been provided of what the new reforms will entail, although there is widespread speculation they will include a broadening of the tax base and further pension and labor reforms. Finance Minister Euclid Tsakalotos has provided no details on the upcoming reforms. Government spokesman Dimitris Tzanakopoulos on Tuesday said no specifics could be given as the reforms are subject to negotiation and agreement with the country’s creditors.
Greece has depended on three international bailout funds since 2010, when it became locked out of bond markets by sky-high borrowing rates. In return for the rescue loans, it has had to overhaul its economy, imposing rounds of spending cuts and tax hikes. The austerity saw the economy contract by more than a quarter and sent unemployment soaring. The jobless figure now hovers at around 23 percent, down from a high of 27 percent.
Nicholas Paphitis contributed.