Varoufakis: Our goal is an agreement that… leads to a comeback

Greece΄s goal is an agreement with the creditors that provides a lasting solution and will allow the country to make a comeback, not a hasty patch-up job to get the next installment of loans, Finance Minister Yanis Varoufakis said at the 19th Economist Roundtable with the Greek Government in Athens on Thursday, AMNA reported.

“Our goal is that the agreement that we will now strike should be a way out, so that we have a …comeback. Because if we simply close an agreement where we cut a few supplementary pensions, hike up VAT on the islands a little bit, just so we get the roughly seven billion of the last installment, and then find ourselves in the same state as before in a month΄s time, I consider that this is something that neither you nor we, neither the Greek people nor finally the creditors, want,” he said.

Varoufakis stressed that he will refuse to put his signature as finance minister to a package that is “macroeconomically inconsistent” and whose numbers don΄t add up.

“If I do this, I will be yet another finance minister that signs a medium-term fiscal programme that he knows cannot work,” he said.

On the points of agreement with the creditors, Varoufakis said that both sides agreed that Greece cannot slip back into generating primary deficits, that it must carry out market reforms or sink, that the state of the labour market is “pitiful” and that the country΄s pension system was unsustainable. 

“How could it be sustainable in a country where employment has shrunk so much, where the capitalisation of pension funds took such a blow with the PSI in 2012, when we have such as huge proportion of black labour…we absolutely agree on the need for administrative reforms and that the crisis has created overwhelming inequalities that are an obstacle to the social consensus needed for reform,” he added.

Given that there was agreement on all these points, why could they not reach an agreement that would end the continued chokehold on the market, he asked and noted that the negotiations were also hampered by “political restrictions”.

“In the corridors and behind closed doors they tell me ΄you΄re right but how can I get this past the Parliament?΄ You understand that we have a problem of consistency between what must be done in order to have a comeback and the things that get past the Parliaments,” Varoufakis commented.

On the structure of Greece΄s debt, he said that this needed to be “redesigned” but clarified that he did not mean a “haircut” and giving the upcoming payments of bonds from Jean-Claude Trichet΄s SMP programme as an example.

“In July-August, the Greek finance ministry will called on to borrow 6.7 billion euros from the partners in some way, in order to pay the bonds…held by the European Central Bank. The remaining sum of these bonds is around 27 billion euros, which must be paid off in the next months. These bonds must very simply be sent to the distant future. This is clear. And I think this is absolutely clear to the people at the ECB,” he said.

One way this could be done, he suggested, was for the ESM to intervene and agree to swap these bonds for a long-term bond issued by the Greek government, paying off the 27 billion euros held by the ECB and thus allowing Greece to also participate in quantitative easing, from which it was currently barred because more than 33 pct of its bonds were held by the ECB.

Similar “smart swaps” could also be employed to facilitate payment of Greece΄s debts to the EFSF in the early ΄20s, he said, which would push the payments further into the future.