Greek austerity measures ‘destined to fail’

Yanis Varoufakis said he understands the Greek PM's difficult position. Picture: AFP/Getty
Yanis Varoufakis said he understands the Greek PM's difficult position. Picture: AFP/Getty
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NEW economic reforms imposed on Greece by creditors are going to fail, according to the country’s outspoken former finance minister.

Yanis Varoufakis said he felt Greece was being subjected to a programme certain to “go down in history as the greatest disaster of macroeconomic management ever”.

His stark warning came 
yesterday as Greece’s prime minister, Alexis Tsipras, reshuffled his cabinet barely 48 hours after dissidents broke ranks over the bail-out deal for the country.

International creditors have demanded that the Greek parliament endorse a wave of measures in order to qualify for further financial assistance – including tax hikes that the Syriza party argues will worsen Greece’s economic plight.

In a major U-turn, after five months of negotiation, Tsipras agreed to enforce significant pension cuts, VAT increases and an overhaul of collective bargaining rules to secure a third bailout package worth up to ¤86bn (£60bn).

Germany was the last of the Eurozone countries needing parliamentary approval to begin the talks.

But the head of the group of Eurozone finance ministers, Jeroen Dijsselbloem, has warned the process will not be easy, and expected the negotiations to take four weeks.

Varoufakis, who has warned that austerity measures for Greece will strengthen support for the far right, said: “This programme is going to fail whoever undertakes its implementation.”

He insisted Tsipras did not fire him from his role as 
finance minister. “He didn’t get rid of me,” he said.

“Alexis Tsipras at some point decided that his government, our government, was at gunpoint. We were given a choice between being executed and capitulating, and he decided that capitulation was the optimal strategy.

“I may disagree with him, and I declared that by resigning my post, but I understand precisely the very difficult 
position in which he finds himself. We’re completely united in lambasting the highly undemocratic and economically irrational policies of the 
European Union towards the government.”

The reshuffle saw nine changes overall, including the ousting of energy minister 
and veteran Marxist, Panagiotis Lafazanis, head of Syriza’s militant Left Platform. He was replaced by former labour minister Panos Skourletis.

Meanwhile, Greek banks 
are set to reopen on Monday after a three-week closure and withdrawal limits have been relaxed, but capital controls remain in place, a government decree said yesterday.

The decree sets a new cumulative weekly withdrawal limit of ¤420 (£292), with the daily limit remaining at ¤60.

The bank closure was enacted on 29 June, after Tsipras called a referendum on lenders’ austerity demands, that 
61 per cent of voters later rejected.

The European Council approved the ¤7bn bridging loan for Greece from an EU-wide emergency fund. The loan was approved in principle by Eurozone ministers on Thursday and now has the go-ahead from all non-euro states.

It means Greece will now be able to repay debts to two of its creditors – the ECB and International Monetary Fund – due tomorrow.