The new government ruffles feathers abroad but gains popularity at home
RATINGS for the evening news soared this week as Greeks tuned into a new show: of Alexis Tsipras, their new prime minister, and his colourful finance minister, Yanis Varoufakis, sharing the spotlight as they separately toured European Union capitals. For Greeks worn down by five years of austerity, it was cheering to see their new leaders “standing up to the euro-zone bosses“, as an official from PAME, the communist trade union, put it.
Mr Tsipras's Syriza party has lost no time getting its anti-austerity message across since defeating Antonis Samaras's New Democracy government on January 25th. Syriza fell two seats short of a majority in parliament, so Mr Tsipras signed up the Independent Greeks, a right-wing anti-austerity party, whose leader, Panos Kammenos, became defence minister.
True to Syriza's promises, Mr Tsipras and Mr Varoufakis challenged their first visitors, Martin Schulz, president of the European Parliament, and Jeroen Dijsselbloem, chairman of the euro group of finance ministers, demanding an end to austerity, the dismantling of the “troika“ of the European Commission, the European Central Bank and the IMF, and an international conference to restructure Greece's debt of 175% of GDP. In return, the Syriza government would crack down on tax evasion and corruption, which previous administrations ignored, and produce a programme of structural reforms in June.
To the delight of many Greeks, other cabinet members also announced measures to reverse many earlier reforms: pension increases,a 45% rise in the minimum wage, a return to collective bargaining and a freeze on privatisations. Poor households will get food stamps and free electricity. Mr Kammenos said that the armed forces would have their pay restored to pre-crisis levels, plus compensation for four years of pay cuts. Mr Varoufakis has not spelt out the budget cost of all this, though he promises still to run a small primary surplus (ie, before debt interest).
The reversal of reforms and the tough stance toward Greece's creditors have increased the new government's popularity. Opposition by the new foreign minister to more sanctions against Russia, albeit short-lived, was also welcomed by many who want the government to defend Greek interests, even against NATO and the EU. One opinion poll gave Mr Tsipras a 68% approval rating after his first week, better than any other recent Greek leader.
Yet the exhilaration could evaporate if Mr Tsipras and Mr Varoufakis fall out with the EU. They have watered down their demands: instead of a debt write-off, Mr Varoufakis now proposes a limited repayment via special bond issues. Greece's creditors insist it must stick to the terms of its bail-outs. Greeks are still removing cash from their bank accounts, though the pace of withdrawal has slowed since the election. On February 4th the ECB said it would no longer accept Greek government bonds as collateral. Earlier the same day an issue of six-month bonds was only just covered, because foreign investors failed to buy. The new government has a tough year ahead of it.