Tsipras walks tightrope with unveiling of new Greek budget

Greek Prime Minister Alexis Tsipras will unveil his government’s policy plans for its new term in office on Monday, including a draft budget for 2016, as he tries to win back the trust of the country’s European partners.

In a three-day-long parliamentary debate set to conclude with a vote of confidence on Wednesday, the 41-year-old leader will seek to strike a balance between complying with creditors’ demands and fulfilling his election-campaign promises for a “parallel program” to alleviate the impact of austerity. European leaders are pushing Greece for deep spending cuts and economic overhauls.

“Comrades, we have an important and difficult task ahead: to implement the agreement of July 12,” Tsipras told lawmakers of his SYRIZA party on Saturday, referring to the bailout deal he struck in the summer. “At the same time, we have to negotiate on the issues that are still open, which we fought to keep open, to hold the ground we gained.” 

Tsipras is trying to contain the economic fallout from the six months of wrangling with creditors that preceded the July deal. The government’s priority is restoring collective bargaining in labor markets and tackling the issue of non- performing loans while protecting primary residences from foreclosures, he told lawmakers on Saturday.

48 milestones

European authorities, meanwhile, are pushing Greece to implement 48 “milestones” by mid-October in order to secure the next tranche from its bailout, according to a document obtained by Bloomberg News on Friday. They include amending laws on household insolvency and early retirement in the public sector.

Circulated among the so-called Euro Working Group of finance ministry officials, the milestones include bills that parliament passed in August, but that haven’t gotten the ministerial and presidential decrees needed for full implementation.

Tsipras said there’s still room for negotiation with creditors on “equivalent measures” for some parts of the austerity program, including opening up the electricity market and a new round of pension cuts. Both are among the dozens of conditions included in Greece’s bailout agreement with euro area member states for unlocking emergency loans.

At stake if Greece doesn’t comply and its creditors freeze disbursements is the country’s ability to service its debt and recapitalize its battered financial system before the end of the year. Greek bonds were among the worst-performing of all sovereign securities tracked by Bloomberg’s World Bond Indexes for the past year.

Also coming by the end of October is completion of a balance-sheet review of Greek banks being conducted under the auspices of the European Central Bank, European Commissioner for Economic and Financial Affairs Pierre Moscovici told Proto Thema newspaper in an interview on Sunday. Greek bank shares hit a record low on Oct. 1, reducing the value of the state’s stake in Greece’s four biggest lenders to 1.9 billion euros ($2.1 billion) on Friday from about 17 billion euros a year ago.

“We need new measures, which will include additional steps for the stabilization of public finances, and front-loaded reform of the banking sector,” Moscovici was quoted as saying.

This week’s policy platform debate and vote of confidence are standard procedure in Greek parliament following an election recess. Tsipras formed a coalition government with the nationalist Independent Greeks party after his victory in a snap vote held Sept. 20.

The former firebrand opponent of bailouts was catapulted to power in January on a promise to end austerity, only to capitulate to creditors’ demands after a cap on emergency assistance from the ECB and the freezing of aid from the euro area brought the country’s financial system to the brink of collapse. His choice to compromise and adhere to austerity measures triggered a mutiny in his party, thus leading Europe’s most indebted state to new elections, which Tsipras won again.

“The Greek people rewarded the difficult fight we put up,” Tsipras told lawmakers on Saturday. “The people also rewarded the difficult choice we made to reach a compromise,” he said, adding that a discussion on easing Greece’s public debt burden will begin before the end of the year.

[Bloomberg]