Greek PM keen to avoid ‘antagonism’ with bailout creditors

Greek prime minister Alexis Tsipras and his finance minister have pledged to avoid a standoff with creditors but say they still intend to roll back key parts of the country's bailout.

Fears about the approach to be taken by the new Syriza-led government, which held its first cabinet meeting Wednesday, have prompted a third day of losses on financial markets, and a swift series of announcements signalled the coalition would not back down from its anti-austerity pledges.

That approach could set it on course for a clash with European partners, led by Germany, which has said it will not renegotiate the aid package needed to help Greece pay its debts.

“There will neither be a catastrophic clash, nor will continued kowtowing be accepted,” Mr Tsipras said on Wednesday.

The new Greek leadership “will not be forgiven” if it betrays its pre-election pledges to renegotiate the terms of the country’s bailout, he said.

No threats

Finance minister Yanis Varoufakis said the talks on Greece's debt "won't be easy, they never are in Europe".

“There will be no duel, no threats, or an issue of who blinks first,” he said.

The planned sale of a 30 per cent stake in Public Power Corporation of Greece, the country's biggest utility, has been halted by Syriza while ministers pledged to raise pensions for those on low incomes and reinstate some fired public sector workers.

“We are coming in to radically change the way that policies and administration are conducted in this country,” Mr Tsipras told ministers at the cabinet meeting.

Markets nervous

Financial markets have looked on nervously, with Greek 10-year bond yields up 50 basis points at 10.30 per cent, the main Athens stock index down 4 per cent and bank stocks down 12.6 per cent to extend losses into a third day.

Saying that the mood towards Greece was changing since his leftwing party's sweeping election victory on Sunday, Mr Tsipras said he would avoid antagonism with European Union and International Monetary Fund creditors.

“Our priority is also a new negotiation with our partners, seeking to reach a fair, viable and mutually beneficial solution so that the country exits the vicious circle of excessive debt and recession,” he said.

Mr Tsipras said the government would pursue balanced budgets but would not seek to build up “unrealistic surpluses” to service Greece’s massive public debt of more than 175 per cent of gross domestic product.

Priorities would be helping the weakest sections of society, with policies to attack endemic clientelism and corruption in the economy, reduce waste and cut Greece’s record unemployment.

After announcing a halt to the privatisation of the port of Piraeus on Tuesday, for which China's Cosco Group and four other suitors had been shortlisted, the government said it would block the sale of a stake in the Public Power Corporation of Greece.

Power utility

PPC, which is 51 per cent owned by the state, controls almost all of Greece’s retail electricity market and accounts for about two thirds of the nation’s power utility. Shares in the utility were down nearly 13 percent, while shares in Piraeus Port were down nearly 8 percent.

"We will halt immediately any privatisation of PPC," Energy Minister Panagiotis Lafazanis told Greek television a few hours before officially taking over his portfolio.

“There will be a new PPC which will help considerably the restoration of the country’s productive activities,” he said.

The previous government led by Antonis Samaras had passed legislation last year to spinoff part of PPC to liberalise the energy market as part of a privatisation plan agreed under the EU-IMF bailout.

In a sign of the potential sensitivity of the move to cancel the privatisations, Tsipras met China's ambassador to Athens, Zou Xiaoli on Tuesday to stress the importance of good relations with Beijing.

Staff reinstated

As well as announcing a halt to selling state assets, ministers have promised to reinstate laid-off public sector workers whose dismissal was ruled unconstitutional and restore cuts to pensions.

"What we have said during the election campaign will be our guide, starting with measures that do not have large spending impact," Deputy Social Security Minister Dimitris Stratoulis told Antenna TV.

Mr Tsipras spoke ahead of a planned visit from the president of the European Parliament, Martin Schulz, to Athens on Thursday, and Jeroen Dijsselbloem, president of the Eurogroup the following day.

The Greek government is willing to hold negotiations with everyone, Mr Tsipras said. After the initial congratulatory notes on Tsipras’s election, euro member states hardened their stance.

"The message 'we want your support but not your conditions' won't fly," said Dijsselbloem, who is also Dutch finance minister. "My message will be that we're open to cooperation but that the support from Europe also means the Greeks have to make an effort."

Reuters/Bloomberg