New Greek leader pledges to renegotiate troika bailout deal

26 Jan 15
Greece’s Left-wing anti-austerity party Syriza has won the country’s general election pledging to end ‘five years of humiliation and suffering’ that the country has endured since an international bailout saved it from bankruptcy in 2010.

By Judith Ugwumadu | 26 January 2015

Greece’s Left-wing anti-austerity party Syriza has won the country’s general election pledging to end ‘five years of humiliation and suffering’ that the country has endured since an international bailout saved it from bankruptcy in 2010. 

Newly-elected leader Alexis Tsipras has promised to increase public spending, raise the minimum wage and re-negotiate the €240bn bailout deal with the ‘troika’ of the European Union, the European Central Bank and the International Monetary Fund. He also swiftly formed a coalition with Right-wing party Greek Independents, giving Syriza a majority in parliament.

In his victory speech, Tsipras hailed the end of ‘austerity destruction’ and promised ‘reform and radical change’.

Syriza will present creditors with a four-year fiscal adjustment plan to replace the one drafted by the previous government of Antonis Samaras, Tsipras said.

‘The new Greek government will be ready to cooperate and negotiate first with our partners a fair, mutually beneficial and sustainable solution to come out of the vicious cycle of indebtedness, to return Europe to stability, growth, social cohesion, on the principles and values ​​that were the founding principles and values, such as democracy and solidarity.’

Greece was forced to make deep budget cuts and fiscal reforms as a condition for the 2010 bailout from the troika.

However, Tsipras said the verdict of the Greek people put the troika deal in the past.

The country’s current bailout programme ends in February, but market commentators said that re-negotiating the deal could ‘test the new Greek government’s resolve’.

Alan Wilde, head of fixed income at Baring Asset Management, said: ‘The Greek result is a great paradox in the sense that we are told the Greek people are voting against austerity measures but wish to remain within the eurozone.

‘In the next few weeks “headline risk” is going to be high as Syriza seeks to re-negotiate bailout terms with the troika. Germany has reiterated this morning that the Greek people have a legal contract with the troika to receive more funds but if they break this and by implication seek to re-negotiate the terms of debt repayment, no more funds will be available in March and this will test the new Greek government’s resolve.’

Adam Kirby, director of UK campaign group Balance the Books added that Syriza’s election win was a ‘reckless choice’.

He said: ‘Syriza are not a magic bullet. The wound they are about to inflict on the Greek people will do little to distract from existing pain.’

Last week, economists called for the Greek debt to be cancelled and urged the country to abandon its austerity program that was crushing economic activity. 

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