Greece’s latest deal with its fellow euro zone countries to secure an extension of its bailout program doesn’t mean the country’s new government has bowed to pressure, the country’s finance minister told CNBC.
“We didn’t get elected in order to clash with our partners, we got elected to renegotiate Greece’s deal with our partners,” Yanis Varoufakis told CNBC in an interview in Athens.
“What is a negotiation? It’s an attempt to find a compromise. The fact that we compromised is not a u-turn.”
On Tuesday, euro zone finance ministers accepted a list of Greek proposals submitted at the 11th hour, but the country’s creditors warned that the reforms must be expanded in detail before new bailout funding would be released.
As a result of the negotiations, Greece’s new government wanted to re-establish trust with the rest of Europe, Varoufakis said.
“The reason why we have this four-month period is to re-establish bonds of trust between us and our European partners as well as the IMF in order to build a new contract between us and our partners so as to put an end to this debt inflationary spiral.”
Keeping Syrzia alive
International Monetary Fund Managing Director Christine Lagarde called the proposals “sufficiently comprehensive to be a valid starting point” but said they lacked “clear assurances.”
Varoufakis said implementing new legislation concerning corruption and tax evasion is his top priority. As to whether European officials will approve each and every measure passed in parliament, he said “there is going to be a great deal of toing and froing between us and the institutions and our partners.”
The trained economist was also critical of the tense negotiation process with euro zone finance ministers, saying they were dominated by “legalisms.”
“You know what I think the main problem is? European finance ministerial meetings are seldom about finance, they’re more about process and rules … and I’m not good at that. I think that when we’re talking about macroeconomics, when we’re talking about Greece’s recovery, I don’t think we have the moral right to talk as if this is applying rules.”
Leftist political party Syrzia rose to power during elections last month on promises to abolish austerity measures, but its principal task of reducing Greece’s $366 billion debt has been flatly rejected. Several Greeks, noticeably senior politician Manolis Glezos, claim the party has bent too much to European creditors, making it no different from the previous administration.
But Varoufakis rejected the notion that Syrzia has been unfaithful to Greeks: “We got elected to renegotiate Greece’s deal with our partners.”
Varoufakis said he will continue to push for debt restructuring despite a Eurogroup statement proclaiming that “Greek authorities reiterate their unequivocal commitment to honor their financial obligations to all their creditors fully and timely.”
“Even though we are a government of the radical left, we come to the table with a mentality of a bankruptcy lawyer from the city of London who simply says if we have a problem with debt, you need to restructure it,” Varoufakis said.
While it remains unclear how the cash-strapped nation will fund itself in the near term, especially when it faces a March deadline to repay an IMF loan, Varoufakis urged investors to look at the bigger picture.
“My message to market people is very simple. They understand that when there is a cash flow problem, which is effectively a spike for a short space of time, but the long term seems quite good, they can be confident that Europe is going to find a way of dealing with the cash flow problem.”
As to how Greece will eventually return to financial markets, it all hinges on solving “a system of three equations and three unknowns,”he said.
“The three unknowns are – the debt level and its flows, secondly investment levels and means of cranking it up, and thirdly primary surplus. … I have no doubt that Europe in the end is going to solve this system of equations and unknowns.”