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10/12/2016

Varoufakis confident on bailout deal, but Sapin wary

Euro & Finance

Varoufakis confident on bailout deal, but Sapin wary

Ex-Finance Minister Yanis Varoufakis voted in favor of the reforms. [European Council]

SPECIAL REPORT / Greek Minister of Finance Yanis Varoufakis is confident on reaching an agreement soon, as talks are progressing with international creditors.

Speaking to a packed room at the European Business Summit on Thursday (7 May), he said the deal would come “within a few days”, as Greece is due to pay €750 million in loan repayments to the International Monetary Fund on 12 May.

“We certainly intend to pay the IMF and we will pay the IMF,” Varoufakis said, presenting a new blueprint for recovery.

Greece is expecting to get the next slice of financial aid, as part of a €245 billion in international rescue package.

“We want Greece to stay in the eurozone. We are closer regarding reaching a deal, but the question is, are we close enough? We are taking stock and moving towards an agreement,” said European Commissioner Pierre Moscovici, in charge of Economic and Financial Affairs.

>> Read: EU hails ‘progress’ in Greek debt talks after Varoufakis sidelined

The agreement, Varoufakis insisted, had to conclude a “sensible” overview of fiscal policy and sustainability of Greek debt as well as reforms.

He said that a sustainable recovery in Greece requires synergistic reforms which would unleash the country’s considerable potential by removing bottlenecks in several areas: productive investment, credit provision, innovation, competition, social security, public administration, the judiciary, the labour market, cultural production, and, last but not least, democratic governance.

https://youtube.com/watch?v=raSuHle_Itg

The seven years of debt deflation, coupled with everlasting austerity, have decimated private and public investment, and forced banks to stop lending.

Without fiscal room, and Greek banks burdened by non-performing loans, the only way out is to mobilise the state’s remaining assets and unclog the flow of bank credit to the healthy part of the private sector.

Varoufakis reiterated his idea of setting up two new public institutions: A development bank that harnesses public assets, and a ‘bad bank’ that enables the banking system to restore the flow of credit to profitable, export-oriented companies

>> Read: Greece reshuffles EU-IMF team, defends Varoufakis against ‘manipulated’ media attacks

Meanwhile, a few miles away, French Finance Minister Michel Sapin did not seem confident that Eurozone finance ministers meeting on Monday (11 May) would reach an agreement.

He also added that a failure to stabilize Greece’s economy would affect economic growth in the European Union.

“If we don’t stabilise things in Greece … it would be a disaster for the Greek economy,” he told the Economic and Monetary Affairs Committee in the European Parliament.

“It wouldn’t be a disaster for the eurozone, but it would be a factor hampering the overall recovery. So we have a common interest in finding sustainable solutions.”

Timeline

  • 12 May: Greece's loan repayments to the International Monetary Fund