Sunday 21 January 2018

Greek finance minister says euro will collapse if Greece exits

MANDATE: Greek Minister Alexis Tsipras, right and his finance minister Yanis Varoufakis. Photo: Petros Giannakouris/AP
MANDATE: Greek Minister Alexis Tsipras, right and his finance minister Yanis Varoufakis. Photo: Petros Giannakouris/AP
Greek Finance Minister Yanis Varoufakis attends the first meeting of the new cabinet in the parliament building in Athens January 28 (REUTERS/Alkis Konstantinidis)

Reuters World Service

If Greece is forced out of the euro zone, other countries will inevitably follow and the currency bloc will collapse, Greek Finance Minister Yanis Varoufakis has said.

Greece's new leftist government is trying to re-negotiate its debt repayments and has begun to roll back austerity policies agreed with its international creditors.

MANDATE: Greek Minister Alexis Tsipras, right and his finance minister Yanis Varoufakis. Photo: Petros Giannakouris/AP
MANDATE: Greek Minister Alexis Tsipras, right and his finance minister Yanis Varoufakis. Photo: Petros Giannakouris/AP
Greek Finance Minister Yanis Varoufakis arrives to attend a meeting in Paris
Newly appointed Greek Finance Minister Yanis Varoufakis (REUTERS/Marko Djurica)
Greek Finance Minister Yanis Varoufakis addresses reporters after talks at the Economy Ministry in Paris (AP)

Read more here: Greece 'will go out of eurozone' - former US Central Bank chief Alan Greenspan 

In an interview with Italian state television network RAI, Varoufakis said Greece's debt problems must be solved as part of a rejection of austerity policies for the euro zone as a whole. He called for a massive "new deal" investment programme funded by the European Investment Bank.

"The euro is fragile, it's like building a castle of cards, if you take out the Greek card the others will collapse," Varoufakis said according to an Italian transcript of the interview released by RAI ahead of broadcast.

Read more here: Greece close to financial abyss as tax revenues plunge 

Greek Finance Minister Yanis Varoufakis and German Finance Minister Wolfgang Schaeuble (L) look discontent as they address a news conference following talks at the finance ministry in Berlin. Photo: Reuters
Greek Finance Minister Yanis Varoufakis and German Finance Minister Wolfgang Schaeuble (L) look discontent as they address a news conference following talks at the finance ministry in Berlin. Photo: Reuters
Greek Finance Minister Varoufakis and German Finance Minister Schaeuble in Berlin.
Greek Finance Minister Yanis Varoufakis and German Finance Minister Wolfgang Schaeuble (L) clash as they address a news conference following talks at the finance ministry in Berlin February 5 (REUTERS/Fabrizio Bensch)

The euro zone faces a risk of fragmentation and "de-construction" unless it faces up to the fact that Greece, and not only Greece, is unable to pay back its debt under the current terms, Varoufakis said.

"I would warn anyone who is considering strategically amputating Greece from Europe because this is very dangerous," he said. "Who will be next after us? Portugal? What will happen when Italy discovers it is impossible to remain inside the straitjacket of austerity?"

Varoufakis and his Prime Minister Alexis Tsipras received friendly words but no support for debt re-negotiation from their Italian counterparts when they visited Rome last week. But Varoufakis said things were different behind the scenes.

Read more here: Greece tells EU it has no short-term cash problem and will present plan next week  

"Italian officials, I can't tell you from which big institution, approached me to tell me they backed us but they can't tell the truth because Italy also risks bankruptcy and they are afraid of the reaction from Germany," he said.

"Let's face it, Italy's debt situation is unsustainable," he added.

Italy's public debt is the largest in the euro zone after Greece's and Italian bond yields surged in 2011 at the height of the euro zone crisis. They have since fallen steeply and have so far come under little pressure from the renewed tensions in Greece.

Varoufakis said his government would propose a "new deal" for Europe like the one enacted in the United States in the 1930s. This would involve the European Investment Bank investing ten times as much as it has so far, Varoufakis said.

Read more here: Greek charmer in the leather jacket finally comes unstuck 

If Europe continues to pursue counterproductive austerity policies the only people who will benefit will be "those who hate European democracy," he said, citing the Golden Dawn party in Greece, the National Front in France and the United Kingdom Independence Party in Britain.

Reuters

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