Financial Times – Greece finance minister unveils plan to end debt stand-off

wind iconGreece’s radical new government unveiled proposals on Monday for ending the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, running a permanent budget surplus and targeting wealthy tax-evaders. Mr. Varoufakis, the new finance minister, outlined the plan in the wake of a dramatic week in which the government’s first moves rattled its eurozone partners and rekindled fears about the country’s chances of staying in the currency union.

Syriza’s election victory had created an opportunity “to strike at the cosy relationship between vested interests in the public sector and vested interests in the private sector that act as a drag on creativity, competitiveness, liberty and democracy,” said Yannis Varoufakis.
The government planned to present its proposals in detailed form to its European partners before the end of February.
“Whatever our partners think about our being from the radical left, we’re serious about reform, serious about being good Europeans and serious about listening. The only thing we shall not retreat from is our view that the current unenforceable programme [agreed with our creditors] needs to be rethought from scratch,” he said.

Full article from Financial Times see here. Excerpts below

After meeting Mr Varoufakis in London, George Osborne, the UK chancellor of the exchequer, described the stand-off between Greece and the eurozone as the “greatest risk to the global economy”.

Attempting to sound an emollient note, Mr Varoufakis told the Financial Times the government would no longer call for a headline write-off of Greece’s €315bn foreign debt. Rather it would request a “menu of debt swaps” to ease the burden, including two types of new bonds.

The first type, indexed to nominal economic growth, would replace European rescue loans, and the second, which he termed “perpetual bonds”, would replace European Central Bank-owned Greek bonds.

He said his proposal for a debt swap would be a form of “smart debt engineering” that would avoid the need to use a term such as a debt “haircut”, politically unacceptable in Germany and other creditor countries because it sounds to taxpayers like an outright loss.

Syriza’s election victory had created an opportunity “to strike at the cosy relationship between vested interests in the public sector and vested interests in the private sector that act as a drag on creativity, competitiveness, liberty and democracy,” he said.

The government planned to present its proposals in detailed form to its European partners before the end of February.

“Whatever our partners think about our being from the radical left, we’re serious about reform, serious about being good Europeans and serious about listening. The only thing we shall not retreat from is our view that the current unenforceable programme [agreed with our creditors] needs to be rethought from scratch,” he said.

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