Greece – negotiating for the right to breathe

Newly appointed Greek Finance Minister Varoufakis attends a hand over ceremony in AthensGreek Finance Minister Yanis Varoufakis has criticised Greece’s creditors for making “no concessions” and turning the negotiations “into a war”. In an interview with Germany’sTagesspiegel he explains why a plan for debt restructuring is a Greek prerequisite for an agreement.

Excerpts below, full interview here

If you compare the figures of both proposals, the creditors demand fiscal measures of about €3 billion and Greece offers €1.87 billion. This does not seem unbridgeable, does it?

But it could be the difference between killing off what is left of the Greek economy and not killing it off. We are in a situation of seven years of continuous shrinkage. If we try to extract through tax and pension cuts more than €3 billion out of this economy there will be a greater deficit next year. It will be like beating a sick cow in order to force it to produce more milk, it will kill it. Even our own proposal of €1.8 billion surplus is excessive. What Greece needs now is a balanced budget.

But this would not be enough to stop the recession.

This is why all these fiscal measures and reforms are only one third of the package we are negotiating. We are very clear: We need a debt restructure to make our debt repayments viable. And we need an investment package. We are proposing it should come from the European Investment Bank (EIB).

Were there any positive signs from the creditors’ side concerning these ideas?

Not more than some positive noises. But what the other side needs to understand is that even the reforms we are proposing have to be part of a bigger plan to end the Greek crisis. This is not just a matter of ending the Greek program, because that is what the bureaucrats want.

We are talking a lot about your struggle with the creditors. This struggle seems to take up so much of your attention and time, so that the government doesn’t seem to have energy left for domestic affairs– to change some things in the structure of the Greek state you criticised yourself before the elections.

The most frustrating part is that these negotiations are taking up all our energy and time. And moreover: the institutions are telling us, if we legislate before we reached a comprehensive agreement this will be seen as a unilateral action and it will blow up the negotiations. One of the very first things I said to my Eurogroup colleagues was, why don’t we push some of the legislation we agree on – the taxation system, the anti-corruption rules – through parliament and meanwhile continue the negotiations? And I was actually told a number of times if I dare to suggest this again this would constitute reason to settle the negotiations.

This means you haven’t yet pushed through anything you planned?

We introduced a humanitarian bill which provides access to food, shelter and energy for the poorest. We also introduced a tax arrears instalment scheme. We have six million tax file numbers. Of those 3.5 million are in arrears to the state for less than €3,000. Not because they are tax cheaters but because they simply cannot pay. This is a tragedy for them because they can’t get a loan, they can’t start a business without a clearance from the tax office. Now they can pay back little by little. We have been harshly criticised for this law by the institutions.

But wasn’t this also because you did it without a threshold? So now also rich tax avoiders benefit from your generous amnesty…

That is a good point. But this is an emergency. In a normal country we would not have to introduce this instalment scheme. In a normal country we would prosecute the tax cheats. But we also have a broken down judicial system. With the big tax cheaters, if you take them to court they get a court case that will be heard in 2023. And by that time you won’t gain one penny from them. We don’t even have tax officers. The salaries for the tax officers were reduced a lot, so a lot of them went into private practice. The first day I was in office I asked: how many tax inspectors do I have access to? You know what the answer was? 100. 100 for the whole of Greece.

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