Opinion / Op-Ed Contributors

Tsipras faces a tough task to trigger growth

By Fu Jing (China Daily) Updated: 2015-08-18 07:38

Tsipras faces a tough task to trigger growth

Greek Finance Minister Euclid Tsakalotos leaves the Maximos Mansion after a meeting with Greek Prime Minister Alexis Tsipras (not pictured) in Athens, Greece August 9, 2015. [Photo/Agencies]

For Greece, the turbulence of the last six months has offered proof that this debt-ridden country really only has one choice: It must tighten its belt to trigger growth.

As part of the latest reform-for-bailout deal, it has agreed to increase its budget revenues, end fuel tax benefits for farmers, phase out the sales tax discounts extended to the Greek islands, so that they disappear fully by the end of 2016, and scrap a range of tax exemptions and amnesties.

The Greek government is also expected to deregulate the natural gas market. And it will relaunch privatization, including the plans to sell the port facilities in Piraeus and Thessaloniki and regional airports.

Before Greek Prime Minister Alexis Tsipras was elected in January, Greece was on the track to emerge from six years of economic recession. And, basically, there is no big difference between the reform package Tsipras has agreed to and the measures his predecessor implemented.

Tsipras has had to compromise and abandon the manifesto that swept him to power in return for more loans and keeping Greece in the eurozone. He won the election in January because he vowed to end austerity, cut taxes, increase welfare and stop privatization, despite all these policies being impossible in Greece, which has had to depend on loans from the International Monetary Fund and European Central Bank to stay afloat.

Prior to the latest 86 billion euro ($95.5 billion) deal, Greece has received two bailout packages totaling 240 billion euros in regular tranches throughout the period of May 2010 to December 2014.

Tsipras has successfully managed to avoid a Greek exit from the euro, but he still faces the tremendous challenges his predecessor did.

However, first he has to deal with internal disagreement. When the Greek parliament voted on the bailout deal last week, nearly one-third of his leftist Syriza Party did not support the deal, with 31 Syriza members voting "No" and 11 abstaining.

This is biggest rebellion inside the party that Tsipras has ever faced and he had to gain support from the opposition (which has basically welcomed the reform-for-bailout deal).

However, this could be the springboard for Tsipras to not only overhaul his party but also launch political reform in a bid to realize political stability, which would be an undoubted blessing for economic prosperity. During the previous five years, Greece has had three prime ministers, all of whom have advocated different policies.

Meanwhile, Tsipras still has to meet the challenge of debt sustainability. His country already has mountainous debt of almost 350 billion euros in total. It has to acquire new loans to be able to make the repayments on previous loans. Thus the conflicts and quarreling between Athens and Brussels will probably continue and both sides will be forced to make compromises in the future if they want to resolve the difficult situation. The International Monetary Fund has already warned of that the debt is unsustainable.

And of course, even while it is trying to pay for its old debts and negotiate new ones, he must still roll out a robust growth agenda. It is reported that the European Union has offered a 35 billion euro growth fund to Greece, but so far this has not been used. And with the implementation of austerity policies combined with the complicated regulations of Brussels, which, for example, will expect to have some say in Greece's privatization projects, Tsipras will find it very difficult to develop the economy.

Therefore, Greece is in a complicated dilemma, and its politicians will need to show courage and vision to persuade people to make the compromises and sacrifices that are badly required to get Greece out of its predicament.

The author is China Daily chief correspondent in Brussels.

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