Greece creditors say no changes in bailout terms for new PM

Conservative party leader Kyriakos Mitsotakis was sworn in as Greece’s new prime minister Monday, a day after his resounding election victory on campaign pledges to cut taxes and negotiate new terms with international lenders. (File Photo: Kyriakos Mitsotakis/Facebook)

ATHENS, Greece — Greece’s bailout creditors on Monday bluntly rejected calls from the country’s new conservative government to ease draconian budget conditions agreed as part of its rescue program.

Conservative party leader Kyriakos Mitsotakis was sworn in as Greece’s new prime minister Monday, a day after his resounding election victory on campaign pledges to cut taxes and negotiate new terms with international lenders.

Euro area finance ministers meeting hours later in Brussels said key targets already agreed with Athens would not be changed.

“Commitments are commitments, and if we break them, credibility is the first thing to fall apart. That brings about a lack of confidence and investment,” Mario Centeno, the Eurogroup president, told reporters after the meeting.

Greece ended its third consecutive international bailout last summer — programs that rescued the country’s euro membership and staved off bankruptcy but also deepened poverty and unemployment as successive governments in Athens were forced to make spending cuts in return for the rescue loans.

As part of those agreements, Greece has pledged to achieve government budget surpluses, before debt costs, of 3.5% of GDP for the coming years. That condition has shackled government spending and, critics say, stifled the country’s recovery.

Klaus Regling, head of the euro area rescue fund and lead Greek bailout creditor, said the high surplus target would remain a key condition.

“It’s very hard to see how debt sustainability can be achieved without it,” he said. “The 3.5% surplus is a cornerstone of the program. It was a cornerstone of the program from the beginning.”

Mitsotakis, whose late father, Constantine Mitsotakis, was a conservative prime minister in the early 1990s, has promised to make Greece more business-friendly by lowering taxes and cutting red tape. But his new government faces pressing financial challenges, including a national debt that exceeds 180% of GDP and banks saddled 45% of their loans unpaid or in trouble.

Analysts said Mitsotakis would be able to pursue growth-friendly policies despite the bailout constraints and financial challenges.

“The main take-away is that New Democracy’s government will be the first one-party government in Greece after nearly ten years,” said Spyridoula Tzima, a senior financial analyst at Global Sovereign Ratings. “Mitsotakis (has) a strong mandate to implement his policy agenda.”

In the election, Mitsotakis’ centre-right New Democracy party won 39.8% of the votes and 158 seats in the 300-member parliament, a comfortable majority.

“The people gave us a strong mandate to change Greece, and we will honour that commandment in full,” Mitsotakis said after his swearing-in ceremony. “We will make the start today with hard work, with full confidence in our ability to respond to the circumstances.”

Hundreds of conservative supporters braved the summer heat to greet him outside the prime minister’s official residence, chanting: “There his is! There he is! The Prime Minister!”

He replaced Alexis Tsipras, whose left-wing Syriza party got 31.5% of the vote. Tsipras became the latest in a series of Greek political leaders to suffer election defeat after implementing tough policies prescribed by bailout creditors from the euro area and International Monetary Fund since 2010.

The extreme right Golden Dawn party, the third largest in parliament at the height of the financial crisis, failed to make the 3% vote threshold needed to get seats in parliament.

Mitsotakis’ new Cabinet will rely heavily on experienced politicians who served in previous conservative governments. The finance minister will be Christos Staikouras, an engineer and economist who previously served as deputy minister. Nikos Dendias, the new foreign minister, held previous Cabinet posts at the ministries of public order, development, and defence.

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Associated Press writers Derek Gatopoulos and Elena Becatoros reported this story in Athens and AP writer Raf Casert reported from Brussels.