Greek government reverses austerity policies, stocks hit

ATHENS, Greece – Greece’s new hard-left Prime Minister Alexis Tsipras sent the Athens stock market diving on Wednesday, January 28, after his government scrapped key privatization projects and pressed home its demand for debt relief.

In sweeping announcements two days after taking power, Tsipras began reversing many of the unpopular measures that underpin Greece’s 240-billion-euro ($269 billion) bailout program.

His “national salvation” government said it was putting on hold the previous administration’s plans to sell a majority stake in the ports of Piraeus and Thessaloniki, and would also halt the privatization of the top electricity and petroleum companies.

China’s giant COSCO group is among the bidders for Piraeus, one of Europe’s busiest ports.

With European leaders preparing to make their first visits to Athens since Syriza swept to power on Sunday, January 25, the president of the European Commission reiterated that canceling Greece’s huge debt was not an option, urging Athens to “respect… the rest of Europe”.

“Greece must comply with Europe,” Jean-Claude Juncker said in an interview with French newspaper Le Figaro published Thursday, January 29, stressing that “there is no question of canceling the debt”.

European Parliament chief Martin Schulz will visit Athens Thursday, the first foreign dignitary to hold talks with the new government, while Jeroen Dijsselbloem, president of the Eurogroup club of eurozone finance ministers, will arrive Friday.

“We respect the popular vote in Greece, but Greece must also respect others, public opinion and parliamentarians from the rest of Europe,” Juncker said.

“Arrangements are possible, but they will not fundamentally alter what is in place.”

“Tsipras promises that Greece will not accept austerity any more. The euro countries respond that there will be no more credit if Greece abandons its commitments,” he said.

Athens’ main stock index fell more than 9.0% Wednesday and the major banks tumbled by a quarter although European markets remained largely unaffected.

Yields on Greek 10-year bonds rose above the symbolic 10% barrier, and ratings agency Standard and Poor’s put the country’s ‘B’ credit rating on watch for a possible downgrade, warning the government was heading for a confrontation with its international creditors.

US President Barack Obama phoned Tsipras Wednesday to congratulate him on his election victory – which puts Greece on a potential collision course with Washington, as well as its European neighbors.

“The president noted that the United States, as a longstanding friend and ally, looks forward to working closely with the new Greek government to help Greece return to a path of long-term prosperity,” a White House statement said.

‘No more submission’

Tsipras, whose Syriza party swept to power on Sunday pledging to end painful austerity after six years of recession, told the cabinet meeting that Greece was no longer willing to bow to the “politics of submission”, in a clear swipe at creditors the EU and the International Monetary Fund.

“Our people are suffering and demand respect… We must bleed to defend their dignity,” Tsipras told his ministers, largely a collection of academics who have never served in government.

He said he wanted a “fair, mutually beneficial solution” with Brussels on the bailout.

The new finance minister, maverick economist Yanis Varoufakis, insisted there would be no “showdown” between Greece and the EU, but also called the austerity cuts a “toxic mistake” that ultimately benefited no-one in Europe.

He said the Syriza-led government wanted “a pan-European New Deal” to encourage growth and help the continent deal with Greece’s crisis.

The ruling Syriza party has made frequent references to a “New Deal”, harking back to the stimulus program that pulled the United States out of the Great Depression in the 1930s.

In another measure, newly appointed Labour Minister Panos Skourletis said the minimum monthly wage be would be restored to 751 euros – it had been cut to 589 euros in one of the key reforms demanded in exchange for the bailout.

‘Solidarity works both ways’

Germany, seen in Greece as taking the hardest line over its massive debts, said European solidarity worked both ways and reminded Athens that other EU nations had helped bail out the crisis-hit country.

German Economy Minister Sigmar Gabriel said the new government in Athens “should show some fairness to the people in Germany and the eurozone who have demonstrated solidarity”.

Tsipras’ coalition partners, the nationalist Independent Greeks (ANEL), are equally opposed to the fiscal cuts imposed over the past five years.

The new coalition must address an end-of-February deadline set by the EU for Greece to carry out more reforms in return for a seven billion euro tranche of financial aid from the bloc and the IMF.

Tsipras must decide soon whether to delay the deadline.

Time is short. Outgoing finance minister Gikas Hardouvelis said Greece had “quite acute” financing needs in March and could not afford for negotiations to drag on until the summer. – Rappler.com