Sunday 22 October 2017

Squeezing Greeks on debt could backfire, says Obama

A man walks by anti-International Monetary Fund graffiti in central Athens yesterday.
A man walks by anti-International Monetary Fund graffiti in central Athens yesterday.

Rachael Alexander

US President Barack Obama has warned that imposing tough austerity programmes on Greece could backfire on its creditors.

"You cannot keep on squeezing countries that are in the midst of depression," Mr Obama said in an interview on CNN.

"At some point, there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits."

His comments come as Yanis Varoufakis, the new Greek finance minister, met George Osborne the British Chancellor in London as he seeks to build support for a renegotiation of his country's 240 billion euro bailout in the face of fierce German opposition.

Greece's new anti-austerity government has refused to work with the troika of international bailout inspectors charged with overseeing its painful fiscal reforms.

Direct

Instead, Mr Varoufakis wants direct access to Greece's trio of creditors, the International Monetary Fund, European Union and European Central Bank (ECB).

His meeting in London with Mr Osborne yesterday came after a stop in Paris, where he said he wanted to reach a new debt deal within months to end his country's loan "addiction".

Mr Varoufakis also said Greece did not want the next promised loan tranche of 7.2 billion euros from the trio.

"It's not that we don't need the money; we're desperate," he said at a joint press conference with his French counterpart Michel Sapin. "What this government is all about is ending this addiction."

He said Greece would have to go "cold turkey" and stop living for the next loan tranche.

Setting out a timetable for a revised debt agreement, which has met with strong German opposition, Mr Varoufakis said if Athens had until the end of the month to come up with detailed proposals, it envisaged reaching an agreement with international partners some six weeks later.

Looking further ahead, he added: "It will be very sensible to have a new contract for Greece and all nations in place by the end of May."

Mr Varoufakis' plea for time to come up with a realistic solution will be seen as another olive branch to Europe after prime minister Alexis Tsipras earlier tried to calm nerves and spooked markets by saying he did not intend to renege on commitments to the EU and IMF. "It has never been our intention to act unilaterally on Greek debt," Mr Tsipras said in a statement to Bloomberg News.

But he said Greece needed greater leeway to tackle root problems in its economy, such as tax evasion, corruption and policies that favour only a wealthy few.

"We need time to breathe and create our own medium-term recovery programme," said Tsipras, who was due to travel to fellow bailed out EU member Cyprus Monday on his first foreign trip since his election victory. Greece's flurry of diplomacy saw Mr Tsipras phone ECB chief Mario Draghi and book meetings with Matteo Renzi, the Italian president, Francois Hollande, the French president and Jean-Claude Juncker, European Commission president, this week.

Mr Varoufakis told reporters in Paris that he also wanted to visit Germany, which has shouldered the bulk of Greece's loans and which strongly objects to Athens' plans.

"It is essential that we meet," Mr Varoufakis said, referring to Wolfgang Schaeuble, the German finance minister. "Germany is the powerhouse of Europe."

But the German finance ministry said it had not yet received an "official request" from Greece for such a visit.

Irish Independent

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