“The problem with the bailout is that it wasn’t really a bailout,” Giannis Varoufakis told Bloomberg on Monday, a day before he was sworn in as Greece’s new Finance Minister.
The 53-year-old economics professor who is now an official member of the new Greek cabinet said in a Bloomberg television interview that, “The problem with the bailout is that it wasn’t really a bailout. It was an extend and pretend, it was a vicious cycle, a debt-deflationary trap, which not only destroyed our social economy but also showed that the cost of our so-called bailout for the average German, the average Italian, the average Slovak, was maximized.”
Now Varoufakis has to be in the negotiating seat of the new leftist Greek administration to discuss the bailout program with the country’s international creditors. A difficult task given the fact SYRIZA won the elections on a pledge to get rid of the austerity measures required by the bailout program and demand the write-off of a big part of the country’s debt.
Greece’s new Finance Minister had told Bloomberg in 2012 that the country should have never joined the euro area, but now that it’s in, a departure would be like falling from a cliff. Yet, renegotiating the bailout program is a difficult task that may lead Greece to a head-on collision with Europe and the International Monetary Fund.
However, when the new cabinet was announced on Tuesday, Alpha Bank SA stocks plunged 20%. The stocks of all four major Greeks banks fell an average of 15%, while the yield on three-year government bonds increased two percentage points to exceed 14%.
Varoufakis opposed spending cuts and austerity, and vowed that debt relief won’t lead Greece out of the Eurozone, “because the cost for region would be too much to bear. Greece already executed the largest writedown of debt in history,” he told Bloomberg.
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