EU officials fly in as Greeks start cancelling austerity policies

Cabinet decides to rehire workers, raise minimum wage and halt privatisations

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Less than 36 hours after being sworn in as Greece’s Prime Minister, Alexis Tsipras and his cabinet got down to business today, spooking markets and raising eyebrows across Europe by cancelling bailout policies.

The answer to how Mr Tsipras plans to avoid a confrontation with Europe as he starts shunning the country’s austerity commitments could come quickly, as high-profile European officials are expected in Athens in the coming days. Martin Schulz, the President of the European Parliament, is scheduled to hold talks in Athens today ahead of the Eurogroup chief, Jeroen Dijsselbloem, tomorrow. Mr Tsipras said the talks would be “useful and productive”. Greece faces potential bankruptcy in March unless it comes to an agreement with its creditors soon.

Mr Tsipras’s cabinet decided it would rehire “unconstitutionally” dismissed workers, restore the minimum wage to €750 (£560) a month and halt privatisations, including the port of Piraeus.

The news was received badly in financial circles. Shares in Greece’s banking sector have fallen more than 40 per cent since Sunday’s election. Piraeus Bank plunged 29 per cent, while its other three big lenders – National Bank of Greece, Alpha Bank and Eurobank – also saw their market value fall by more than a quarter as economists estimated up to €8bn of deposits have been withdrawn. The Athens Stock Exchange lost around 9 per cent.


Mr Tsipras said his government had four priorities: dealing with the humanitarian crisis by offering food and electricity to the poor, restarting the economy by supporting businesses, renegotiating with the creditors by offering investment and reform proposals, and stamping out corruption.

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

The incoming Finance Minister, Yanis Varoufakis, said the new government would turn the page on the “toxic mistakes” of the bailout agreement while he called for a “pan-European new deal” to jump-start the bloc’s economies. “The problem isn’t that Germany, Italy, and the poorer-than-us Slovakia didn’t give enough money to Greece. They gave us more than was needed and it was all thrown into a black hole,” the 53-year old economics professor said.

Mr Varoufakis remained optimistic he would find common ground in his negotiations. But Mr Dijsselbloem cautioned “deliberations with the EU won’t be easy”.

The Governor of the Bank of England, Mark Carney, urged the eurozone to make a “bold” move towards shared tax and spending arrangements. He accused it of being timid in reforms needed to drag it out of stagnation and urged it to embrace “mechanisms to share fiscal sovereignty”.