Wed | Dec 12, 2018

After bailout Odyssey, Greece ready to be 'normal' again

Published:Wednesday | August 22, 2018 | 12:00 AM
In this photo released by Greek Prime Minister's office, Greek Prime Minister Alexis Tsipras delivers a speech from the western Greek island of Ithaca, legendary home of the ancient mariner Odysseus, hero of Homer's Odyssey epic, on Tuesday, August 21, 2018.

Greece's eight-year bailout ordeal will forever be bookended by two of the country's iconic islands.

In choosing the western island of Ithaca to declare the end of the bailout era on Tuesday, Greek Prime Minister Alexis Tsipras harked back to one of the country's legendary heroes from antiquity.

From the purported home place of Odysseus, the mythical Mycenaean king whose arduous 10-year travels are immortalised in Homer's Odyssey, Tsipras said in a televised address that Greece was ready to become a "normal" country again.

"Since 2010, Greece has undergone a modern Odyssey," he said, in a speech heavy on Homeric and nautical allusions. "Ithaca is just the beginning."

Tsipras declared that Greece has regained its financial freedom, after years of bowing to bailout creditors' demands for sorely needed cutbacks and reforms.

Overlooking a small bay from the pine-forested hills, Tsipras' address provided a reminder of the beginning of Greece's crisis. In 2010, then Prime Minister George Papandreou addressed the Greek people from the eastern island of Kastellorizo, informing them that the country was effectively bankrupt and had to get financial help.

In return for the loans, successive governments imposed crippling cutbacks to right the country's finances and balance budgets deeply in the red. 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.

"Now we have reached our destination," Tsipras said. "The bailouts that carried with them austerity and recession and turned our country into a social desert are over.

"Our country is regaining its right to define its own fortunes and future," he added. "Like a normal European country, without having policies forced on it by foreign officials, with no more blackmail, no more sacrifices for our people."

 

One per cent down

 

Greek stocks closed one per cent down Tuesday, while the yield on the benchmark 10-year Greek bond fell slightly to 4.2 per cent.

Opposition leader Kyriakos Mitsotakis, whose conservative New Democracy party is leading in Greek opinion polls ahead of scheduled parliamentary elections next year, poured scorn on Tsipras' "false" Ithaca symbolism.

"We have not reached the end of the journey," he said. "Today is the end of cheap funding, but the harsh measures and heavy commitments undertaken by Mr Tsipras continue."

The country remains shackled to the austerity demands of its former creditors. And even though it has little fear of new calls for cutbacks from abroad, its hard-won fiscal freedom still carries a high price.

Though the country will no longer have to pass regular checks from creditors to get money it needs to avoid bankruptcy, it 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 (US$300 billion) from the other countries that use the euro currency, and from the International Monetary Fund.

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.

AP