New Greek government must meet austerity commitments, warns eurozone chief

BRUSSELS (AFP) – Eurogroup chief Mario Centeno on Monday urged Greece’s new government to stick to reforms and strict public spending commitments agreed with its eurozone creditors during a punishing decade of bailouts.

“We must keep our commitments, this is the only way I know to gain credibility,” Centeno told reporters in Brussels on the day conservative Prime Minister Kyriakos Mitsotakis took office on a promise to ease up on the austerity mandated by the eurozone.

“Commitments are commitments. If we break this, credibility is the first thing to fall apart and this brings a lack of confidence, investment and at the end of the day, growth,” Centeno added.

Centeno, who is also Portuguese Finance Minister, delivered his warning to a Greek government that faces a hefty challenge of delivering on campaign promises of tax cuts and a break with austerity.

The heart of the challenge is the promise made by Greece to the eurozone to deliver a budget primary surplus of 3.5 per cent for the next several years – an extremely high bar of fiscal rectitude.

Portuguese Finance Minister and Eurogroup President Mario Centeno rings the bell at the start of a meeting of Eurogroup Finance Ministers at the European Council headquarters in Brussels. – AFP

The spending target “is and was a cornerstone” of the third bailout programme that Greece exited in August 2018 but has committed to delivering on until 2022.

“It’s not something new that was invented… by the Eurogroup recently,” Centeno said.

Klaus Regling, a key EU official in charge of overseeing Greece’s debt repayments, is to visit Athens next week in hope of getting clarification on the new government’s plans.

Mitsotakis has set himself the tricky job of keeping Greece’s international creditors onside while easing the hardship on Greeks – by lowering taxes and renegotiating fiscal targets.

The austerity is intended to help cut a public debt that last year stood at EUR335 billion (USD376 billion), or 180 per cent of gross domestic product (GDP).

The debt load is forecast to fall to 168 per cent of GDP this year, but only through the belt-tightening brought in by outgoing prime minister Alexis Tsipras which Mitsotakis’s New Democracy party says is stifling growth.