Kyriakos Mitsotakis, in search of an exit from the Greek labyrinth

After ten years of a deep crisis which threatened its permanence in the eurozone and the very foundations of the European Union , Greece elected Kyriakos Mitsotakis as new prime minister on Sunday, with the hope that the conservative leader will find a way out of the debt labyrinth and resume economic growth in the Mediterranean country.

Mitsotakis’ New Democracy ( ND ) party achieved a landslide victory with nearly 40% of the votes cast, securing an outright majority in the unicameral Parliament that would enable his administration to carry out the further privatization of the economy while encouraging foreign investment and reducing taxes .

“I asked for a strong mandate and the Greek people delivered. We have made our plan very clear. We want to drive a real reform agenda for the country that is ambitious, very bold and very detailed. And of course we have made the case that lowering the primary surplus will be to the benefit of everyone—not just the Greek economy yet also our creditors,” stressed Mitsotakis.

During remarks to the press, the former minister of Administrative Reform ( 2013 - 2015 ) declared that discussions with European creditors are expected to begin immediately after his government receives a vote of confidence from the Parliament on July 25.

However, the first reactions from the European Union have been a clear sign of the huge challenge Mitsotakis is facing, as well as proof of the vicious circle that locks Greece into poverty and stagnation.

Speaking after the meeting of Eurogroup finance ministers in Brussels, Klaus Regling , head of the European Stability Mechanism , said that creditors would not likely accept a reduction of the primary surplus target —set at 3.5% of Gross Domestic Product and, according to economists, a condition to resume growth, although they would discuss the suspension of the tax-free ceiling reduction if targets are met in other ways.

The key negotiation is now anticipated at the September 13 Eurogroup meeting , which will address the damage for the primary surplus target caused by the past administration’s pension bonuses , and tax cuts introduced in May.

Regling highlighted that there has been a notable improvement in the Greek economy compared to a few years ago, and said that the 3.5% of GDP target Athens has committed to is a “ cornerstone of the program ,” adding that it is “very hard to see how debt sustainability can be achieved without that.”

For its part, on Wednesday the European Commission reduced its forecast for Greek growth in 2019 , setting the bar at 2.1% , down from 2.2% in its spring report in May, due to former Prime Minister Alexis Tsipras’ electora l “ handouts .”

On Sunday’s snap elections, Mitsotakis— son of former premier Konstantinos Mitsotakis ( 1990 - 1993 )—defeated incumbent Alexis Tsipras and his Coalition of the Radical Left ( Syriza ) party, who led the country during the worst phase of the crisis.

Greek conservative Kyriakos Mitsotakis sworn in as Prime Minister

Austerity measures

A harsh critic of the austerity measures implemented by the administration of Antonis Samaras ( ND ), Tsipras rose to power in 2015 promising to end the policies of the Troika (the European Central Bank , the International Monetary Fund and the European Union ) imposed on Greece in return for bailing out its banks, foreign banks and government debt.

Nevertheless, the German Federal Chancellor Angela Merkel and her influential Finance Minister , Wolfgang Schäuble , rejected any possibility of reducing the burden of the economy through a partial write-off of the unpayable interests.

They ignored the Eurogroup’s responsibility for the problem, despite it authorized untenable loans during the boom times which included the organization of the 2004 Olympic Games in Greece , and the failure of the European Union statistics agency , Eurostat , to detect the “ creative engineering ” used by Athens to hide the spiraling debt , now amounting to EUR € 300 billion ( USD $338 billion ), and 180% of GDP .

What is more, fearing the “ Greek contagion ” of other indebted nations in the eurozone as Spain , Italy , and Portugal , Schäuble repeatedly threatened Greece with expulsion from the bloc and the end of further assistance .

Playing his last card while Greek banks were running out of cash, Tsipras called a referendum on the Troika’s virtual ultimatum to accept a bailout .

The Greeks voted 60-40 to reject the “ memorandum ,” yet Syriza capitulated on the grounds that it was avoiding a deeper recession, isolation, and social instability.

As the British economist Michael Roberts has noted, Syriza ploughed on in the hope that if met the austerity measures it would eventually be able to resume growth, gain some “fiscal space,” and “return to the market” for government borrowing.

Pensions were slashed, public sector employees were sacked and the first loans from the Troika were used to pay off German and French banks which held billions on government debt that was not virtually worthless.

The next loans were used to meet repayments to the IMF , the ECB , and other governments from the first bailouts.

“None of this money went to alleviate the depression being suffered by Greeks to their living standards. The economy collapsed by 30%, pensions and wages fell 40%; thousands of young people emigrated for work and public services were decimated,” underscored Roberts.

Instead of the option presented by economist and Syriza member of Parliament, Costas Lapavitsas , who argued for a negotiated exit from the European Union , revert to the drachma , devalue the currency , impose capital controls on any flight of money , renege on the debt , and revert to government spending programmes , Tsipras decided to stay in the European Union .

Today, the Greek growth rate has been averaged little more than 1% a year and is currently slowing down from a short period above 2% to just 1.3%, whilst unemployment among people under 25 years amounts to nearly 45%, and the country will be under Troika supervision until 2059 .

The result of these sacrifices was a disaster for Syriza in the polls with 31% of the vote.

Voter turnout was just over 57%, the lowest rate since the end of military rule in 1974, exposing disillusionment with all parties.

Mitsotakis, however, has remarked the political significance of his victory for the European Union, pointing to the defeat of neo-Nazi Golden Dawn party which crashed out of Parliament with less than 3% of the vote cast.

The former banker is facing other challenges, as tensions with Turkey have risen in the eastern Mediterranean over conflicting claims to oil and gas reserves off the divided island of Cyprus .

In a move that has alarmed Brussels, which is threatening the Eurasian country with sanctions, Ankara announced that it would be sending a second drilling ship to begin the search for hydrocarbons off Cyprus .

The government of President Recep Tayyip Erdogan insists it is acting within its own continental shelf or in territorial waters, where Turkish Cypriots would also be entitled to an equal share of any finds.

Editing by Sofía Danis

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