Government kicking the can down the road, with eye on polls
With the possibility of early elections in May on the horizon and recent polls putting Prime Minister Alexis Tsipras’s back up against the wall, the government appears more focused on avoiding politically costly moves rather than tackling the country’s pressing issues such as the fragile banking system, imminent high court rulings ordering retroactive payments to pensioners and civil servants, as well as the plummeting stock of the overindebted Public Power Corporation (PPC).
As a result, analysts say, the government that succeeds the Tsipras administration will inherit a series of problems that it will have to tackle against the backdrop of the country’s imperfect access to international markets, a slump in the privatization program and the pressure on the real economy due to the big increase in the minimum wage.
However, the most salient task at hand is the effort to bridge the gap between the country’s creditors and the government over nonperforming loans (NPLs) and the protection of primary residences.
Deputy Prime Minister Yiannis Dragasakis warned last month that failure to effectively deal with NPLs could possibly lead to another bank recapitalization, which will only further increase the burden on wary Greek taxpayers.
The issue has reportedly also become a source of friction within the leftist government, with Dragasakis, Finance Minister Euclid Tsakalotos and Tsipras aide Dimitris Liakos in favor of a speedy agreement between the banks and creditors.
On the other hand, Minister of State Alekos Flambouraris and Alternate Minister of Administrative Reform Christoforos Vernardakis favor a more hardline stance against creditor demands.
Without excluding the possibility of a “unilateral” move by the government, analysts believe an imperfect compromise will be reached, which will effectively kick the NPL can down the road.
This would spell more misery for the country’s banking system, whose NPL load amounts to 45 percent against the European Union’s 4 percent.
The International Monetary Fund has repeatedly described NPLs as the biggest danger to the Greek economy.
