Greek FinMin Varoufakis: We Can't Accept the Fiscal Adjustment Signed by the Previous Govt

Greek Finance Minister Yanis Varoufakis is currently holding the third and most crucial of a series of meetings with his Eurozone counterparts in Brussels in an attempt to strike a deal regarding the future of the Greek program.

The talks set to begin initially at 4:30 pm -but now moved to 5:30 pm- were characterized by participating Maltese Finance Minister Edward Scicluna as “difficult” due to the German-led block’s hardline stance toward the Greek proposal for a six-month extension of the loan agreement submitted yesterday by Varoufakis with the commitment that Athens is ready to accept financial and procedural conditions on the existing deal while asking for negotiations on other elements. “I think they have now reached a point where they will tell Greece ‘if you really want to leave, leave’,” Scicluna said in an interview referring to the possiblity of a Grexit.

Berlin’s initial objections, with the use of strong language, as it characterized the Greek proposal as a “Trojan horse,” were later softened after a telephone conversation between Greek Prime Minister Alexis Tsipras and the German Chancellor Angela Merkel.

In an interview with British newspaper Daily Telegraph, the Greek economy’s new “Czar” said the country’s delegation is “perfectly prepared to refrain from any moves that would jeopardize financial stability or Greek competitiveness.” In addition, though, Varoufakis highlighted that what Athens “cannot accept is that the fiscal adjustment, agreed by the last government, be carried through just because the rules say so.”

Furthermore, the Greek Finance Minister said there can be no agreement if creditors continue to insist that Greece sticks to the terms of its Troika bailout and increase its primary budget surplus from 1.5% to 4.5% of GDP by next year. “We have already done more fiscal tightening than has ever been done by any country in peace time, and Greece is still in depression with declining nominal GDP. There is no macroeconomic argument that can be made for further tightening,” he stressed, adding that “the only reason for doing so is out of ideology or on punitive grounds. All we are seeking is a way to end the debt-deflation cycle and restore the Greek economy’s credit circuits.”

Varoufakis’ new proposal, submitted yesterday to Eurogroup President Jeroen Dijsselbloem and the rest of the Eurozone Finance Ministers, is willing to “honor Greece’s financial obligations to all its creditors” and desist from any “unilateral actions” in exchange for bridging finance and a six-month interim arrangement, he explained to the British newspaper. The Greek offer included the crucial proviso that SYRIZA will limit austerity to “appropriate primary fiscal surpluses… that take into account the present economic situation.”

The newly elected SYRIZA-led Greek government is trying to balance between a much-needed agreement with its European loan partners in an attempt to avoid a liquidity crunch at the end of the month (when the current deal is due to expire) and Tsipras’ promises to put an end to the previous government’s austerity policies, imposed by the EC/ECB/IMF Troika.