Friday

3rd Feb 2023

Greek leftist vows to cancel bail-out, renationalise economy

  • Radical left leader Tsipras claims that the bail-out equals a return to the drachma (Photo: PIAZZA del POPOLO)

Greek leftist leader Alexis Tsipras on Friday (1 June) unveiled his economic programme if he is elected later this month, pledging to cancel the EU-sponsored bail-out and renationalise banks and companies.

But economists say his plans are unfeasible and mere electoral posturing.

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With polls indicating a close race between his radical-left Syriza party and the former ruling New Democracy party, Tsipras has presented the 17 June vote as a choice between the austerity programme attached to the €130 billion bail-out and his radical plan for Greece.

"You either implement the bail-out or you cancel it. There is no such thing as a more or less evil bail-out, a more or less inappropriate medicine. New Democracy or Pasok did not want to cancel its implementation. We will," he said in Athens.

The 37-year old politician, whose party came in second in 6 May elections, said the austerity measures prescribed by international lenders since 2010, when Greece first asked for a bail-out, have not worked and should be abrogated, as the country is struggling with the worst recession since World War II.

He vowed to keep Greece in the eurozone however, calling threats of a Greek euro-exit a bluff.

Instead, he claimed that the bail-out itself "a mechanism of definitive bankruptcy and propelling the country into a voluntary departure from the euro area, the only exit that is institutionally viable."

"This false dilemma of 'bail-out or drachma' hides the real equation that the bail-out leads to the return of the drachma," Tsipras said.

According to his plan, if he is elected Prime Minister, all austerity measures would be revoked, restoring all social benefits. To pay for this, Tsipras would seek a moratorium on his country's debt payments until the economy comes back on track.

Banks would be re-nationalised, energy, transport, telecommunication and other strategic companies would also be taken over by the state. Price controls for basic items such as milk and bread would be put in place.

Tsipras pledged to suspend all defence acquisitions - an area untouched by the austerity drive, which saw billions of euros go to French and German companies for submarines and aircraft. Greece's is one of Europe's highest spenders in defence matters, with cuts so far taken rather on the personnel side than on equipment.

Another move likely to strike a sensitive chord among Greek taxpayers is his promise to go after rich shipowners, who currently are not obliged to pay any tax in Greece, as well as other high earners.

Yet despite the appeal a young politician vowing to take on "rotten, corrupt and discredited elites" may have with the electorate, his economic plans raised eyebrows among experts, as a cancellation of the bail-out would de facto leave Greece with no money and force it to exit the euro.

"Most of it is posturing ahead of the elections. He cannot do things like that, there would be convictions, fines imposed by the European Court of Justice and the EU commission," Peter De Keyzer, chief economist at BNP Paribas Fortis, a Belgian bank, told this website.

This vote-seeking strategy "is holding the rest of Europe for ransom," the Belgian economist said, since the uncertainty about Greece's future in the eurozone has driven up borrowing costs in Italy and Spain.

"If countries get the feeling that they can blackmail the rest to get money, it's the end of the eurozone," he added, labelling the bail-out-scrapping threats as "suicidal."

Even if "some relaxation" of the austerity programme could be negotiated with the next Greek government, De Keyzer says it is a matter of credibility for the whole eurozone that the rules are respected.

Were Syriza to form a government that insisted on scrapping the programme altogether, the Belgian economist sees an "even speedier" move by the rest of the eurozone to become a fiscal union and avoid a total meltdown.

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Spain's economic woes deepened on Thursday as 16 of its banks and four regions were downgraded by Moody's, while statistics confirmed the country is still in recession, just as fears about a Greek euro-exit are running high.

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