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 The former academic said he was ready for a clash with euro zone
paymaster Germany and its allies over Greece's determination to
scrap austerity measures, end cooperation with the "troika" of EU/ECB/IMF
officials overseeing the bailout program and demand a "haircut"
restructuring its debt.
"If a debt can no longer be paid off then that leads to a haircut,"
Varoufakis told German magazine Stern in an interview released on
Wednesday. "What is critical is that Greece's debt cannot be paid
off in the near future."
German Finance Minister Wolfgang Schaeuble has said that if Greece
is not willing to request an extension of its 240 billion euro
bailout - the biggest in financial history - "then that's it",
ruling out further assistance or debt forgiveness.
He and other euro zone ministers said they wanted to hear Greece's
ideas at a Eurogroup meeting beginning at 1630 GMT (11:30 a.m. EST)
in Brussels, but they warned that time was short since the bailout
program expires at the end of this month and no solution is in
sight.
Greek bond yields rose and shares fell before the meeting, with
investors concerned that failure to reach a deal in the next couple
of weeks could lead to a possible Greek default and exit from the
euro currency.
However, most analysts said the odds were on an agreement emerging
this month after lots of sound and fury.
"We are once again seeing a kind of chicken race between the new
Greek government on one side and the 'troika' on the other," Swedish
SEB Bank chief economist Robert Bergqvist said. "Our main scenario
implies a compromise that will ease current financial market
worries."
European Union leaders will take up the issue at their first summit
with Greek Prime Minister Alexis Tsipras on Thursday. EU officials
said they would be briefed on the talks but there would be no room
for debt negotiation at a summit mostly devoted to the
Ukraine-Russia conflict, fighting terrorism and longer-term reform
of the euro zone's governance.
Tsipras struck a defiant tone in parliament late on Tuesday, saying
that "little Greece" was changing Europe by casting off austerity.
"We are not negotiating the bailout; it was canceled by its own
failure," the leader of the hard left Syriza party declared before
winning the confidence vote with the backing of 162 lawmakers in the
300-seat chamber. "I want to assure you that there is no going back.
Greece cannot return to the era of bailouts."
Tsipras agreed on Wednesday to work on reforms with the Organisation
for Economic Cooperation and Development, a Paris-based
inter-governmental think-tank, but said they would not be imposed
from outside.
OECD chief Angel Gurria appeared to endorse Tsipras's criticisms of
the bailout program after they met in Athens, saying it had produced
low growth, high unemployment, rising inequality and a loss of
trust.
DEBT RENEGOTIATION
Varoufakis has proposed a six-month transition in which Greece would
be allowed to issue more short-term debt, receive the proceeds of
ECB holdings of Greek bonds and tap unused bank rescue funds while
renegotiating its debt. Athens would swap its euro zone loans for
GDP-linked bonds and its ECB-held debt for interest-bearing
perpetual bonds with no reimbursement date.
EU officials have said the most Greece can expect is a further
extension of the repayment deadline for its euro zone loans, a lower
interest rate and perhaps a prolonged moratorium on debt service
payments, in return for continued reforms under some form of
external supervision.
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A senior party aide of Chancellor Angela Merkel said "direct
provocation" by the new Greek government had diminished the German
parliament's willingness to help Athens. Tsipras has talked of
seeking reparations for the World War Two Nazi occupation of Greece
and personally rebuffed Schaeuble.
Irish Finance Minister Michael Noonan, whose country emerged
successfully from its own EU/IMF bailout in 2013 and now has the
highest growth rate in Europe, said he was pessimistic about
Wednesday's talks and accused the Greeks of double-speak.
"I don't see the basis for a solution emerging yet," Noonan told a
parliamentary committee in Dublin. "Many of the proposals that are
emanating are, on the face of it, technically impossible."
He said Tsipras and Varoufakis had said different things to their
domestic and European audiences.
Austria's finance minister, Hans Joerg Schelling, said he thought a
solution could be reached by the end of February if Greece wanted,
otherwise things would enter a "critical phase".
"We again have a situation now in which money is being withdrawn
from Greek banks. We have a situation that certain debts may not be
able to be serviced, and that is of course a critical phase because
the reaction on financial markets would be enormous," he told ORF
radio.
Greek ministers have talked of possibly turning to Russia or China
for assistance if there is a deadlock with the euro zone.
Tspiras discussed deepening cooperation and investment in a
telephone call with Chinese Prime Minister Li Keqiang, a Greek
government official said. A Chinese Foreign Ministry spokeswoman
said she was not aware of any offer of aid to Athens.
Foreign Minister Nikos Kotsias held talks in Russia on Wednesday but
there was no mention of financial assistance from Moscow at a joint
news conference with his Russian counterpart.
The new government meanwhile confirmed that it has halted plans to
privatize the main ports of Piraeus and Thessaloniki, in which
China's Cosco had been a contender.
(Additional reporting by Lefteris Papadimas, Angeliki Koutantou and
Deepa Babington in Athens and Caroline Copley in Berlin; Writing by
Paul Taylor; editing by David Stamp)
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