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Choking austerity is over, vows new Greek premier

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Staff at the Greek department of finance who have been protesting for months having been laid off, celebrate after being told they would be re-employed by the new minister

Staff at the Greek department of finance who have been protesting for months having been laid off, celebrate after being told they would be re-employed by the new minister

AFP/Getty Images

Staff at the Greek department of finance who have been protesting for months having been laid off, celebrate after being told they would be re-employed by the new minister

Greece's radical leftist prime minister said yesterday that he wanted to avoid "a mutually destructive clash" with Europe but insisted that he would demand a renegotiation of the country's massive debt.

Alexis Tsipras's remarks caused deep unease on the markets, with the Greek stock market falling more than 8.5pc and yields on Greek government bonds rising to near record levels, a sign of investor concern that Athens could default and be forced out of the euro zone.

At his first cabinet meeting since winning the general election on Sunday, the 40-year-old former Communist said he would negotiate over the €240bn that Athens owes its creditors in order to secure a "viable, fair, mutually beneficial solution".

"We won't get into a mutually destructive clash, but we will not continue a policy of subjection," he said. "This is a government of societal salvation and it has a very difficult task.

"We want to negotiate the reduction of the debt and an end to conditions of choking austerity."

He said the burden of paying off the loans was "crushing and unobtainable".

His newly-appointed, finance minister, Yanis Varoufakis, who will spearhead the negotiations with international lenders, said the bail-out given to Greece had been a "toxic mistake".

"Today we are turning the page on that mistake that cost human lives, that were lost or undermined," said Mr Varoufakis, an academic who taught at Essex University before taking up posts in Australia and the US.

EU leaders have indicated that they are not prepared to write-off any part of the debt, but that they might be open to giving Greece more time in which to pay it back and to reduce interest rates.

Officials in Brussels said they expected the Greeks "to fulfil everything that they have promised to fulfil."

That sets the stage for a drawn-out confrontation with the new Greek government, a coalition between Syriza and the right-wing Independent Greeks, a minor party which is also vehemently opposed to paying off all the debt.

Mr Tsipras was elected on a promise to the Greek people to have the debt drastically reduced and to roll back the deeply-resented austerity policies that were introduced at the insistence of the EU, European Central Bank and International Monetary Fund five years ago.

But as he embarks on negotiations, he will need to tone down the fiery rhetoric that helped get him elected.

"His party has been very radical in the past but it is going to have to be less confrontational now and that will be a big challenge," Dr George Kyris, an expert on Greek politics from Birmingham University, said.

"There is room for manoeuvre but it depends on whether they will be able to adjust to how things are done in Europe. At the same time, Brussels has to face the fact that this is a democratically-elected government."

In a blow to international investor confidence, the government announced that it would halt the privatisation of Greece's biggest port, at Piraeus, south of Athens.

The previous, conservative government had agreed to sell a 67pc stake in the port authority, with China's COSCO group one of the companies putting in a bid.

One of the main planks of Syriza's election campaign was a pledge to block the sale of such state assets.

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Mr Tsipras said his government would ignore key budget commitments and reforms previous administrations had promised in exchange for rescue loans from fellow eurozone countries.

The hard line prompted a quick warning from the European Union and sent local investors into a panic on the prospect that the country might get cut off from its financial lifeline.

Shares on the Athens Stock Exchange tumbled more than 9pc, with the country's four main banks losing over a quarter of their value.

Government bond yields spiked, particularly for short-dated debt, an indication investors are more worried about a default in the short term.

The rate on 10-year bonds spiked to around 10.5pc, while the three-year yield hit 16.7pc.

(© Daily Telegraph London)

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