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11/12/2016

Varoufakis: We can return to elections

Euro & Finance

Varoufakis: We can return to elections

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

Greece could call a referendum or have early elections should its eurozone partners reject its debt and growth plans, Greek Finance Minister Yanis Varoufakis said in a newspaper interview yesterday (8 March).

The new Greek government, led by Alexis Tsipras, won an election in January promising to renegotiate a bailout agreed with the International Monetary Fund and its European Union partners that requires strict budget discipline and sweeping economic reforms.

The government reached a temporarily deal with its lenders last month and Athens has until the end of April to specify the reforms it will make in exchange for further aid.

>> Read: Eurozone approves Greek reform plan with reservations

Eurozone finance ministers are meeting today (9 March) in Brussels to discuss a letter of pledged reforms sent by Athens last week.

Should Brussels ultimately reject Greece’s proposals, Varoufakis told Italian daily Corriere della Sera. “There could be problems. But, as my prime minister has said, we are not yet glued to our chairs. We can return to elections, call a referendum.”

He did not say what the referendum would be on, but there has previously been speculation that an impasse might force the Greek government to hold a public vote on whether to continue to accept EU strictures. That that could raise questions about Greece’s place in the eurozone.

In the interview, Varoufakis said that the response so far by eurozone partners to his proposals to replace its current debt with bonds linked to nominal growth is “silence.”

“I’d like for Europe to understand that this would be a way of paying back more money, not less,” Varoufakis said of the growth-linked bonds.

With the government’s popularity level above 40%, Varoufakis said “people understand” that the government is fighting the “establishment that said it was saving Greece while it put everything on the backs of the poor”.

In 2011, Greece nearly tipped the entire eurozone into a debt crisis until it accepted the bailout. Now the concern is that the failure of Greece to reach a new deal with lenders will throw the euro region back into crisis.

There has been growing uncertainty over Greece’s cash position. It faces a decline in tax revenues, while aid from EU/IMF lenders remains on hold until Athens completes promised reforms.

In the same interview, Varoufakis said that the state had the money “to pay pensions and public administration salaries”. He said Greece does not need a new, third loan to pay its bills.

He also criticised the European Central Bank for being “disciplinary” in not letting it issue short-term debt, and said the central bank should buy Greek debt as part of its bond-buying programme right away and not this summer, as it has said it would. 

The Greek ministry of finance issued a statement, rejecting interpretations that Greece’s eurozone membership would be questioned in a referendum.

“In the interview with Corriere della Serra, the minister reiterated the same position, underlining in every way that Greece’s position in the eurozone is a given and does not in any way form part of the government reform programme that Greece is working on in coordination with its partners and the institutions,” the ministry said.

It said the minister was asked what he would do if all his proposals were to be rejected and had replied, “As the prime minister has stated, we are not attached to our posts. If needed, if we encounter implacability, we will resort to the Greek people either through elections or a referendum” regarding the content of reforms and fiscal policy.

Background

Greece secured a four-month extension of its financial rescue on 24 February when its eurozone partners approved a reform plan that backed down on key left wing measures and promised that spending to alleviate social distress would not derail its budget.

The respite, to be ratified by some national parliaments in the coming days, averted an imminent banking meltdown and a potential state bankruptcy for now, but tough negotiations lie ahead over the country's longer-term economic future.

A Greek finance ministry official said the eurozone's most heavily indebted nation would start discussions immediately with its EU and IMF partners on meeting this year's financing shortfall.

As required by the creditors, Finance Minister Yanis Varoufakis had sent Brussels a letter that watered down campaign promises to end privatisations, boost welfare spending and raise the minimum wage, vowing to consult partners before key reforms and to keep them budget-neutral.

The Greek letter pledged not to reverse ongoing or completed privatisations, and to ensure that the fight against what the government calls the humanitarian crisis caused by bailout-driven austerity "has no negative fiscal effects".

>> Read: Greece to pass anti-austerity bill