ATHENS • Prime Minister Alexis Tsipras marked the one-year anniversary of his election yesterday as Greece finds itself once again with a battle on its hands.
A gruelling negotiation over reforms looms with the country's creditors, and bonds are sinking once more after a roller-coaster year.
Mr Tsipras is hurtling towards a showdown over social security reforms, which he wants to push through by raising contributions and not cutting primary pensions. Protests are mounting at home as Greeks brace themselves for more pain under a premier they elected for his anti-austerity promises.
"The worst still lies ahead for Tsipras in terms of the social backlash to difficult measures like pension reform," said Dr Sotiria Theodoropoulou, a senior researcher at the European Trade Union Institute in Brussels. "The measures target mostly the middle class, the very same group that brought him to power, and whatever honeymoon the government enjoyed with trade unions is now over."
Markets have taken note of the potential turmoil ahead, making Greek bonds the worst among all sovereign securities tracked by Bloomberg's world indexes this year.
"These bouts of volatility in Greek yields say that the Greek crisis is not over," said Mr Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers in London. "It gets temporarily parked, or put out of focus, for a short while by temporary, transient measures being taken, but then comes back to the centre of the stage every time we approach a review."
Mr Tsipras' frosty reception at the World Economic Forum last week in Davos, where he met International Monetary Fund managing director Christine Lagarde and European Central Bank president Mario Draghi, came as Greek officials in Athens and low-ranking officials from the country's creditor institutions exchanged data relating to the pension proposals.
The government's need for an international success comes amid mounting domestic woes. Mr Tsipras will have to get the reforms through Parliament, where he holds a majority by just three seats.
Also, in the latest protest against his government, farmers and seamen are threatening to mark his anniversary by disrupting transport.
Mr Tsipras also faces a rejuvenated opposition, with the New Democracy party moving ahead of his Syriza party in two opinion polls since electing a new leader, Mr Kyriakos Mitsotakis, on Jan 10.
The business front has turned troublesome too, with a dispute over a gold mine souring relations with Canada's Eldorado Gold and the removal of Piraeus Bank's chief executive upsetting the hedge fund Paulson & Co, both investors in Greece.
Under the terms of Greece's bailout, the government needs to achieve a Budget surplus before debt service of 3.5 per cent of gross domestic product by 2018. That target underpins the demands of Greece creditors that the pension reforms make sufficient savings.
Behind that is the promise of debt relief to follow, which would act as a vote of confidence that will attract investment and help Greece grow.
Mr Tsipras' government has said cuts in primary pensions are a "red line" it will not cross. For creditors, the government's proposed option of raising contributions instead of cutting pensions would hurt growth.
"Greece is still a problem," billionaire investor George Soros said in an interview with Bloomberg Television's Francine Lacqua in Davos last Friday. "It has been so messed up that you can only muddle along. But there is no solution, and actually that problem is now coming to the boiling point again. You can see it on the face of Tsipras."
BLOOMBERG
