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After six years’ austerity, Greeks feel no joy from new debt deal

Protesters of the communist-affiliated PAME union shout slogans during a demonstration against a new package of tax hikes and reforms in Athens

Greece‘s government trumpeted a debt relief deal with other eurozone countries on Wednesday as the beginning of the end of its bruising six-year financial crisis but Greeks remained sceptical and markets were cautious.

After years of austerity demanded by Greece‘s international creditors – the latest passed by parliament on Sunday – Greeks wonder whether the sacrifices they made to stay in the eurozone were worth the pain.

“We are done, we can’t even leave our homes anymore to have a coffee,” said Panagiotis Zabetakis, 50, a carpenter who, like one in every four Greeks, is unemployed.

Playing with traditional komboloi worry beads at a cheap cafe in an Athens suburb, Zabetakis paid 1 euro  for his morning coffee, half what it would cost in the city centre.

But prices everywhere will rise on June 1 when the measures passed to secure Wednesday’s deal start coming into force.

By next year Greeks will pay an extra 20-30 cents for their coffee and the price of just about everything else will rise too as added tax will (VAT) goes up to 24 per cent from 23 per cent. Greeks’ spending power, meanwhile, is in sharp decline.

“We are running after the Europeans, hoping they throw us a bone which would suffice for a few months. I’m very disappointed,” Zabetakis said, criticising the deal which opens the way for debt relief from 2018, but does not include any firm promise to reduce the payments Greece has to make.

CAUTIOUS OPTIMISM

Greece has been hit with waves of pension cuts and tax increases since it was forced to seek its first bailout in 2010.

Leaving the meeting in Brussels where he secured 10.3 billion euros ($11.5 billion) in new funds, Finance Minister Euclid Tsakalotos said he hoped the deal marked “the beginning of turning Greece‘s vicious circle of recession-measures-recession into one where investors have a clear runway to invest in Greece.”

Markets reacted with cautious optimism. Greek government bond yields fell to six-month lows and the Athens stock exchange rose by 1.5 per cent.

Analysts said that to regain investor confidence Greece still needs to show it can implement the promised reforms, even though much of the hard work – pushing the measures through a fractious parliament – has already been done.

Ratings agency Moody’s said the “implementation risks” of the deal remained high because of the government’s thin majority and the backdrop of political and social discontent.

Prime Minister Alexis Tsipras, elected in early 2015 promising to end austerity only to row back and accept a new bailout, managed to scrape together a narrow majority of 153 members in the 300 seat parliament on Sunday and one of his lawmakers quit after the vote.

“We are adopting measures and policies which run counter to the core of our values and policies,” the resigned member of parliament, Vassiliki Katrivanou, said on her Facebook page. “But I cannot think of any credible alternative.”

UNCERTAINTY

Carsten Hesse, a strategist at Berenberg Bank, said that “the ups and downs of uncertainty will not go away until Greece can finance itself via markets again.”

“A vigorous implementation of reforms should provide the base for a swift stabilization of investor and business confidence,” said Platon Monokroussos, economist at Athens-based Eurobank.

The deal won a provisional commitment from the IMF to return to the bailout process, despite its doubts that Greece will miss its targets.

But with Germany opposed to cutting the debt pile, euro zone ministers made any relief measures such as extending maturities on loans contingent on Athens respecting strict criteria, something Greeks fear means more austerity.

On the streets of Athens, a 33-year-old chartered accountant, who declined to give his name fearing repercussions at work, said he was tired of scraping by.

“I feel we are just living in this vortex of austerity measures,” he said. “It’s a constant of just sacrifices.”

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