September 21, 2017 / 2:54 PM / a month ago

As crisis ebbs, Tsipras promises doubters a "new" Greece

ATHENS (Reuters) - Greek Prime Minister Alexis Tsipras has found a precious commodity he hopes can help him and the nation turn a corner after years of crisis and austerity -- time.

Greek Prime Minister Alexis Tsipras speaks during a news conference at the annual International Trade Fair of the city of Thessaloniki, Greece, September 10, 2017. REUTERS/Alexandros Avramidis

Since taking power in early 2015, he has spent most of his days and nights in firefighting mode, battling Greece’s creditors to renegotiate the harsh terms of a series of bailout deals.

Now, though, Tsipras and his ministers have more time at last to function like the government of a normal country, pinning their hopes for recovery from a long depression on more investment and jobs, after negotiating a ceasefire with the European Union and International Monetary Fund in June.

Despite scepticism among voters, investors and Greece’s lenders, Tsipras is trying hard to position himself as a post-crisis leader who can steer the country out of the bailout programme next year in time for elections due in 2019.

The 43-year-old leftist acknowledged this week that the crisis was not over, but expressed optimism about the rest of his term. “In a year from now ... we will have left the bailout behind and we will have one more year, the most creative of our term, to materialise our plan for a ‘new’ Greece,” he said.

Still, two final rounds of negotiations remain before the current bailout deal ends in August 2018. Many Greeks, worn down by austerity policies including pension cuts and tax increases dictated by the creditors, have yet to be convinced. Tsipras’s Syriza party is trailing in the opinion polls.

Nevertheless, Tsipras has been using a calm that Greece has rarely enjoyed since 2015, when he was first elected on promises to end austerity, to push through reforms other than those prescribed by the lenders and to schmooze with investors.

Foreign direct investment hit a seven-year high in 2016, while Greek bonds and stocks have rallied 12 and 18 percent respectively so far this year. The IMF and the EU forecast the economy will grow by more than two percent both this year and next after the depression wiped a quarter off Greek GDP.

For all his pre-election pledges to scrap the bailout, Tsipras has ended up imposing more belt-tightening.

At least Greeks are starting to see improvements in long neglected infrastructure, largely funded by the EU. The government has opened two motorways this year, including a link to Patras, a major ferry port for trade with Italy and the rest of the EU. This completed a project that had been stalled for years and replaced one of Greece’s most dangerous roads.

The jobless rate has also dropped, but is still the euro zone’s highest.

OUT OF THE BASEMENT

Until June, when Athens struck the deal with the lenders on reforms and debt relief, the cabinet met infrequently; debate was dominated by the bailout talks and ministers with portfolios not directly connected to them rarely got a word in edgeways, one government official said. Since then ministers have found time to work on bills including education and health reforms.

“It’s liberating,” one minister said. Many cabinet colleagues and officials had spent much of the past two years holed up in bailout talks at the Athens Hilton hotel. “You need to emerge from the Hilton basement at some point.”

The government has also stepped up private meetings with potential investors, officials said, while Tsipras created a task force this month to free up more projects tangled in red tape.

Some investors nevertheless still doubt Tsipras can pull off an economic turnaround.

“There is an inconsistency in the message the prime minister is delivering and the actions of the ministries,” George Burns, chief executive of Canadian miner Eldorado Gold Corp, one of Greece’s biggest new foreign investors, told Reuters.

Eldorado threatened to halt further investment unless a permit row over its mines in northern Greece was resolved this week. It postponed this after the government granted some licences, but scepticism runs deep among other investors.

CLEAN EXIT

Tsipras would like to be remembered as the man who restored Greece’s finances and ended international supervision of the economy. He wants the next creditors’ review completed as early as December and to achieve “a clean bailout exit”, without a standby credit line that would come in return for more reforms.

Athens made its first bond issue in three years in July and plans at least two more in the next seven months, aiming to fund itself by market borrowing in place of bailout money next year.

His conservative predecessor had a similar exit strategy as long ago as 2014 and seemed on course to achieve it. Instead Tsipras beat him and presided over the chaotic summer of 2015, when banks were closed for weeks as the financial system came close to collapse.

Tsipras has much political ground to recover. Support for Syriza has crumbled from around 35 percent in 2015 to 16 percent now, leaving it at least six percentage points behind the conservative New Democracy party, which has promised tax cuts.

A lot can go wrong as Tsipras tries to turn the political and economic tide. Time may be as much his enemy as his friend. The bailout reviews could derail or drag on for months, leading to renewed crisis. The second such review lasted half a year, and the delays hurt economic activity.

For their part, the lenders worry Greece may backtrack on agreed reforms, which would delay the conclusion of the review. Labour reforms that parliament passed during the summer lull were viewed by lenders as backtracking on promises.

“The gap between Tsipras’s actions and his words, the shortcoming in his actions, that’s what may trap him,” a person close to the lenders told Reuters, warning that Greece may not manage to regain full market access and conclude the reviews.

After two years’ experience of power, the government still struggles to deal with some practical problems. It has been trying for 10 days to contain an oil spill from a tanker which polluted popular beaches near Athens, angering residents.

Tsipras has been on a charm offensive, ranging from pep talks at ministries to photo opportunities with investors and young entrepreneurs and trips across the country.

Still, the lenders remain cautious. “We fully understand the government’s desire for a clean exit,” the European Central Bank’s mission chief in Greece, Francesco Drudi, said.

But he told Proto Thema newspaper: “This will require a lot of effort to convince markets, investors and depositors that the momentum for reform will not abate and that no reversal of actions taken during the programme will occur.”

Additional reporting by Lefteris Papadimas and Karolina Tagaris; Editing by Mark Bendeich and David Stamp

Our Standards:The Thomson Reuters Trust Principles.
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