Greece’s Tsipras Insists on ‘Not One Euro More’ of Austerity

  • Premier spoke to newspaper on two-year anniversary of election
  • Euro-area finance ministers will discuss impasse on Thursday

Greek Prime Minister Alexis Tsipras dug in against creditor demands for more pension cuts and tax increases before a meeting of euro-area finance ministers to unblock the country’s bailout review.

“There is no way we are going to legislate even one euro more than what was agreed in the bailout,” Tsipras said in an interview with Efimerida ton Syntakton, to mark the two-year anniversary since he was elected on an anti-austerity platform. “The demand to legislate more measures, and contingent ones, no less, is alien not just to the Greek Constitution but to democratic norms.”

Euro-area finance ministers will discuss Greece when they meet in Brussels on Thursday, with Greece and officials representing the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund locked in a stand-off over how to complete the country’s second bailout review, now a year behind schedule. The IMF, in particular, views the projections shared by Greece and the European creditors that the country can reach a primary budget surplus of 3.5 percent of gross domestic product by 2018 as too optimistic.

Tax, Pensions

The IMF says the surplus will only reach 1.5 percent, and that Greece needs to cut the income-tax-free threshold and pensions to meet the target. Greece rejects this, and instead proposes to extend a fiscal contingency mechanism already in place until the bailout expires in 2018. The government proposes extending the mechanism, which automatically triggers unspecified spending cuts if bailout targets are missed, for an additional year to 2019.

An IMF decision not to take part in the bailout would cause problems and bring delays to closing the bailout review before an informal deadline of Feb. 20, when euro-area finance ministers meet again, a European Union official told reporters in Brussels on Wednesday. The official said that after the February meeting, EU governments will have their minds on a series of elections, so it will be hard to take any significant decisions on Greece.

“If the IMF insists on immediate pensions cuts and other fiscal measures, the chances of a Feb. 20 Eurogroup deal will fall significantly,” Mujtaba Rahman, an analyst at London-based Eurasia Group, wrote in a client note on Wednesday. “This would increase domestic political instability.”

The IMF last week sought to dispel the concerns it won’t be part of the latest Greek bailout program, the country’s third in its eight-year debt crisis. It was agreed on in July 2015 after Tsipras’s brinkmanship following his election led to bank closures, the introduction of capital controls and threatened the country’s place in the euro area.

After German Finance Minister Wolfgang Schaeuble hinted he’d discontinue the program if the IMF walks away, the fund’s Managing Director Christine Lagarde said her organization would remain fully engaged in the program. The IMF has repeatedly called on European creditors to provide more debt relief for Greece, as well as on the government to carry out more structural reforms.

“The IMF needs to be frank in its view of the Greek program,” Tsipras told Efimerida ton Syntakton. “And Europe needs to take into account the new situation created by the change of political leadership in the U.S., and make decision based on the common interest, not just the short-term political calculations made by each country.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE