Greek government reverses austerity policies, stocks hit


ATHENS: Greece’s new hard-left Prime Minister Alexis Tsipras sent the Athens stock market diving on Wednesday after his government scrapped key privatisation 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 programme.

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 privatisation of the top electricity and petroleum companies.

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

The announcements sent stocks on the Athens exchange tumbling, with the main index losing over 9.0 percent and the main banks tumbling by a quarter.

Yields on Greek 10-year bonds also rose above the symbolic 10-percent barrier, and ratings agency Standard and Poor’s put the country’s ‘B’ credit rating on watch for a possible downgrade, warning that some of the government’s policies were sending the country into a confrontation with its international creditors.

European markets though appeared to shrug off the problems in Greece and remained largely unaffected.

Tsipras, whose Syriza party swept to power on Sunday pledging to end painful austerity after six years of recession, told his first 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 programme 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.

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”.

Greek bank stocks were hit especially hard Wednesday on concerns that the new government will renege on its debt obligations.

Shares in the four main banks — Piraeus, Alpha, Eurobank and National Bank — slid between 25 and almost 30 percent.

An unnamed source told Bloomberg that 14 billion euros had been withdrawn from Greek banks in the run-up to the election, including 11 billion euros in January alone.

But Daniele Nouy, the chair of the European Central Bank’s Supervisory Board, said Greek banks were robust enough to survive despite the post-election turbulence.

“They are pretty strong,” she told Bloomberg Television. “A lot of good work has been done to strengthen their balance sheets during the last years. They will go through this crisis like they went through the previous ones.”

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.

European Parliament chief Martin Schulz will visit Athens on Thursday, the first foreign dignitary to hold talks with the new government.

The European commissioner for economic and financial affairs, France’s Pierre Moscovici, said he ruled out any “break” between the European Commission and the new Greek administration, the French daily Le Parisien reported Wednesday.

The Commission and the European Union are willing to seek “less intrusive, more flexible forms of cooperation” with Athens, the paper quoted him as saying.

The head of the eurozone finance ministers, Jeroen Dijsselbloem, will also visit the Greek capital on Friday “to get to know” new leaders, his spokeswoman said.



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