Greece's eight-year bailouts started with an island and ended with an island. Papandreou, top, announced the financial rescue plan on the island of Kastellorizo, while Tsipras chose Ithaca to declare the end of the bailout era. TWO PHOTO COMBO: top image - dated Friday, April 23, 2010 Greek Prime Minister George Papandreou announces Greece's decision to request activation of a financial rescue plan, from the remote southeast Greek Aegean island of Kastellorizo. bottom photo - dated Tuesday, Aug. 21, 2018, released by Greek Prime Minister's office, Greek Prime Minister Alexis Tsipras speaks about an end to Greece's bailout travails from the legendary island home of Odysseus, the mythical Mycenaean king. (AP Photo/ top - Tatiana Bolari, bottom - Andrea Bonetti/Greek Prime Minister's Office via AP)

After bailout Odyssey, Greece ready to be 'normal' again

August 21, 2018 - 12:03 pm

ATHENS, Greece (AP) — Greece's eight-year bailout ordeal will forever be bookended by two of the country's iconic islands.

In choosing the western island of Ithaca to declare the end of the bailout era Tuesday, Greek Prime Minister Alexis Tsipras harked back to one of the country's legendary heroes from antiquity.

From the purported home place of Odysseus, the mythical Mycenaean king whose arduous 10-year travels are immortalized in Homer's "Odyssey," Tsipras said in a televised address that Greece was ready to become a "normal" country again.

"Since 2010, Greece has undergone a modern Odyssey," he said, in a speech heavy on Homeric and nautical allusions. "Ithaca is just the beginning."

Tsipras declared that Greece has regained its financial freedom, after years of bowing to bailout creditors' demands for — sorely-needed — cutbacks and reforms.

Overlooking a small bay from the pine-forested hills, Tsipras' address provided a reminder of the beginning of Greece's crisis. In 2010, then-prime minister George Papandreou addressed the Greek people from the eastern island of Kastellorizo, informing them that the country was effectively bankrupt and had to get financial help.

In return for the loans, successive governments imposed crippling cutbacks to right the country's finances and balance budgets deeply in the red. Over the bailout era, the Greek economy contracted by a quarter and unemployment swelled with one in five still out of work. Incomes were repeatedly slashed and taxes hiked.

It's clearly been a hugely difficult and painful journey for Greece and one that has lasted almost as long as Odysseus' legendary adventures.

Odysseus was an unwilling protagonist in the 10-year Trojan War, a semi-mythical expedition by Mycenaean Greek kingdoms to conquer the city of Troy in what is now northwestern Turkey. After the fall of Troy, pursued by angry gods, Odysseus took another ten years of trials and tribulations at sea to return to Ithaca.

And once there, battered and in a beggar's rags, Odysseus found his home taken over by a bunch of youths who were badgering his faithful wife to remarry. He massacred them, and a more apocryphal story tells how later Odysseus died at the hands of his own son with the enchantress Circe.

"Now we have reached our destination," Tsipras said. "The bailouts that carried with them austerity and recession and turned our country into a social desert are over."

"Our country is regaining its right to define its own fortunes and future," he added. "Like a normal European country, without having policies forced on it by foreign officials, with no more blackmail, no more sacrifices for our people."

Greek stocks closed 1 percent down Tuesday, while the yield on the benchmark 10-year Greek bond fell slightly to 4.2 percent.

Opposition leader Kyriakos Mitsotakis, whose conservative New Democracy party is leading in Greek opinion polls ahead of scheduled parliamentary elections next year, poured scorn on Tsipras' "false" Ithaca symbolism.

"We have not reached the end of the journey," he said. "Today is the end of cheap funding, but the harsh measures and heavy commitments undertaken by Mr. Tsipras continue."

The country remains shackled to the austerity demands of its former creditors. And even though it has little fear of new calls for cutbacks from abroad, its hard-won fiscal freedom still carries a high price.

Though the country will no longer have to pass regular checks from creditors to get money it needs to avoid bankruptcy, it cannot return to the old lax ways that put it in a mess in the first place.

During the past eight years, Greece avoided bankruptcy after getting loans worth some 260 billion euros ($300 billion) from the other countries that use the euro currency, and from the International Monetary Fund.

Though Greece has turned a massive deficit on its annual budget into a sizeable surplus, further austerity measures remain on the horizon. Pre-agreed pension cuts and tax hikes lurk in 2019 and 2020.

Greece has a 24 billion-euro cash buffer, set up with the help of bailout funds that will provide substantial breathing space up to the summer of 2020.

After that, it will really have to stand on its own feet and as such it will have to take consideration of the demands of investors in international bond markets — any slippage on the budget front could see the interest rates they charge for Greece to borrow rise again, potentially to unsustainable rates.

In the coming period, Greece must develop a working relationship with private investors, who will need robust signs of fiscal prudence, adherence to agreed reforms and economic growth to agree to place their funds in a country whose credit rating is still well below investment grade.

The GSEE main private sector labor union contended Tuesday that the Greek people's Odyssey is far from over.

"For us, there can be no exit from the bailouts unless there is an end to the vicious cycle of austerity, unemployment and widespread social crisis," it said in a statement.

Tsipras has repeatedly issued assurances that his left-led government will tread the mandated course of fiscal virtue.

In Ithaca, he promised "prudence and responsibility, so that we never return to the Greece of budget deficits and bankruptcy."

At the same time though, Tsipras is under pressure to provide some form of relief to wide swathes of the population hard-hit by the recession — chiefly pensioners, the unemployed and low-income groups.

Government officials say this will be publicly formulated in early September, at the opening of an annual trade fair in the northern city of Thessaloniki which is traditionally a platform for governments to announce their economic policy plans.

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