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Greek finance minister says euro will collapse if Greece exits

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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)

Greek Finance Minister Yanis Varoufakis attends the first meeting of the new cabinet in the parliament building in Athens January 28 (REUTERS/Alkis Konstantinidis)

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MANDATE: Greek Minister Alexis Tsipras, right and his finance minister Yanis Varoufakis. Photo: Petros Giannakouris/AP

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.

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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

Greek Finance Minister Yanis Varoufakis arrives to attend a meeting in Paris

Newly appointed Greek Finance Minister Yanis Varoufakis (REUTERS/Marko Djurica)

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)

Greek Finance Minister Yanis Varoufakis addresses reporters after talks at the Economy Ministry in Paris (AP)

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MANDATE: Greek Minister Alexis Tsipras, right and his finance minister Yanis Varoufakis. Photo: Petros Giannakouris/AP

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.

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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 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)

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)

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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

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.

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"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.

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.


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