ATHENS – Greece remains shackled to the austerity demands of its former creditors even though it officially entered its post-bailout era Tuesday.
Though the country has little fear of new calls for cutbacks from abroad, its hard-won fiscal freedom still carries a high price.
In a visit that was heavy on symbolism, Prime Minister Alexis Tsipras traveled Tuesday to the western island of Ithaca — legendary home of the ancient mariner Odysseus, hero of Homer’s “Odyssey” epic, who spent 10 years struggling to get back to his family after the siege of Troy.
Speaking to local officials on the island, ahead of an expected televised address to the nation, Tsipras compared Greece’s bailout travails with those of Odysseus.
“We must remember that the return to Ithaca is not the end of the adventure,” he added.
Though Greece will no longer have to pass regular checks from creditors to get money it needs to avoid bankruptcy, the country cannot return to the old lax ways that put it in a mess in the first place.
During the past eight years, Greece avoided bankruptcy after getting loans worth some €260 billion ($300 billion) from the other countries that use the euro and from the International Monetary Fund.
In return, successive Greek governments had to enact a series of austerity measures demanded by creditors. Over the bailout era, the Greek economy contracted by a quarter and unemployment swelled with one in five still out of work. Incomes were repeatedly slashed and taxes hiked.
Though Greece has turned a massive deficit on its annual budget into a sizeable surplus, further austerity measures remain on the horizon. Pre-agreed pension cuts and tax hikes lurk in 2019 and 2020.
Greece has a €24 billion cash buffer, set up with the help of bailout funds that will provide substantial breathing space up to the summer of 2020.
After that, it will really have to stand on its own feet and as such it will have to take consideration of the demands of investors in international bond markets — any slippage on the budget front could see the interest rates they charge for Greece to borrow rise again, potentially to unsustainable rates.
In the coming period, Greece must develop a working relationship with private investors, who will need robust signs of fiscal prudence, adherence to agreed reforms and economic growth to agree to place their funds in a country whose credit rating is still well below investment grade.
Tsipras has repeatedly issued assurances that his government will tread the mandated course of fiscal virtue.
At the same time though, Tsipras is also seeking to provide some form of relief to wide swathes of the population hard-hit by the recession — chiefly pensioners, the unemployed and low-income groups.
Government officials say this will be publicly formulated in early September, at the opening of an annual trade fair in the northern city of Thessaloniki that is traditionally a platform for governments to announce their economic policy plans.