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February 25, 2015
Following is the full unofficial transcript of a CNBC Exclusive interview with Greek Finance Minister, Yanis Varoufakis.
All references must be sourced to a 'CNBC Exclusive Interview'.
Interviewed by Julia Chatterley of CNBC in Athens.
Julia Chatterley (JC) : Is this a victory for the Greek people because there are already people saying this list looks similar to what previous governments would have implemented?
Yanis Varoufakis (YV): It's actually very dissimilar if you look very carefully, actually not that carefully. What we have managed to avert is another fanning of the flames of the debt deflationary cycle. So for instance the previous government had already committed had it been re-elected to reduce pensions, to increase VAT during the tourist season, to make a number of changes that would deepen the crisis
JC: So you're ruling out no pension cuts?
YV: Of course over the next four months there will be no such thing.
JC: And beyond that?
YV: Beyond that it's unchartered territory because the reason why we have this 4 month period is to re-establish bonds of trust between us and our European partners as well as the IMF in order to build a new, we call it, contract between us and our partners so as to put an end to this spiral, the debt inflationary spiral; reform Greece; and make sure that CNBC doesn't care about Greece anymore, because we don't want to be in the headlines for all the wrong reasons
JC: You've got a 2 month window here before this plan gets formalised, what do you plan to pass and implement as far as measures are concerned immediately?
YV: Well primarily two kinds of legislation. The first concerns corruption and tax evasion. Immediately, this is something we have to demonstrate both to our own people and to our partners in Europe and beyond that we are firstly willing and secondly ready to implement.
JC: And how much cash can that raise because there's been some confusion about what you believe on that.
YV: It's like an archaeological site, when you dig, you don't know what you're going to find. Hopefully you're going to find a great treasure, I'm sure we're going to find a great treasure, the question is do we have the means by which to do so. The second is that we want to be very energetic in concerns the humanitarian crisis. This is why we were elected. We have incredible degrees of poverty, hunger. Absolute poverty, not relative poverty. People who used to have homes and shops and have families now are living rough and we have to deal with that.
JC: Are the institutions going to have sign off though on the measures that you pass and implement through parliament in these two to fourth month period?
YV: There is going to be a great deal of toing and froing between us and the institutions and our partners but what we have established through stubborn refusal to succumb to the notion that elections change nothing over the past couple of months or weeks I should say is the notion that this government deserves to have a degree of room for policy-making that allows us to reform Greece and to carry the great multitude out there with us. This is the government for the first time in Greece that has the people behind it and it would be a terrible waste not just for us but for our partners to allow this wave of support to dissipate through non-action.
JC: What the markets need to know right now is how Greece is going to fund itself over the next couple of months until the end of April when this gets sign off. The economy minister has been very honest about how precarious the situation is right now. What are you relying on? Are you hoping the ECB will allow you to issue T-bills? What's the plan here.
YV: Well my message to market people is very simple. They understand that when there is a cash flow problem, which is effectively a spike for a short space of time, but the long term seems quite good, they can be confident that Europe is going to find a way of dealing with the cash flow problem. Can you imagine allowing the euro zone to fragment over a few billion euros after this country was inundated with what 170 to 150, depends on how you measure it, billions it would be a waste for everyone.
JC: But the markets didn't care over the last two weeks and you could read that actually they don't care whether Greece stays or leaves, that QE has actually made your job harder.
YV: I just don't believe that. I think the markets took it for granted that euro zone would not fragment. They just didn't believe the threat of Grexit, we didn't believe them either. Of course, you never know accidents happen but my interpretation of the markets is that they believed that the accidents would be averted at the last moment and so far they have been proven right and I hope that they will continue to be proven right and I trust that they will.
JC: Is that your leverage then, your on-going leverage in these negotiations?
YV: No, our only leverage is the logic of our proposals because what we are saying, even though we are a government of the radical left, we come to the table with a mentality of a bankruptcy lawyer from the City of London who simply says if we have a problem with debt you need to restructure to it and then you have to restructure the entity and then you have to find ways to carry the personnel with it, the personnel being the citizen of Greece and this is all we've been saying.
JC: Have you made enemies in Brussels?
YV: No, I don't think so. What we have done is we've ruffled feathers because we refuse to speak in the language of the establishment and who have the audacity of raising important issues about our economy and our society when for many years now, unfortunately, Europe has become entrenched in a legalistic language that has neglected the two causes of the crisis?
JC: I'll rephrase that, have you made personal enemies in Brussels
YV: Certainly not, I don't think so, no.
JC: Do you think you were naïve going into Brussels thinking that countries that also want flexibility would support you right now given that they have their own electorates to answer to?
YV: I think absolutely not. Look, in the first week or two we did startle a lot of people because we wanted to. We wanted to bring to them the sense of urgency that this collapsing social economy has. Greece is a nation of 10 million people about. This is a povertized country, a country that has fallen into a black hole five years ago and which is not extricating itself from it and that's terrible even for our creditors because then they would not get their money back. And we needed to shock them by simply telling them things as they are. And then within a week or so after having put them in front of the situation as it is on the ground, we then very quickly moved into phrasing these positions and coming up with suggestions within the legalistic language that the understand and this is why we now have a fresh beginning.
JC: People are saying you got terminology concessions but actually very little else. How far will you be pushed at this stage? How far will you go before you say you know what we need to do these measures and we'll take you to a referendum cause right now the people are behind us?
YV: You know what, I mean this is typical human nature. Some people who have been insisting that the program that we've been under must surely be the program that we shall remain under simply refuse to understand that this has changed. So they keep insisting that that program is still on-going. Let me give you a very simple number. The program that we challenged compelled to the Greek government to extract 4.5% of the primary surplus every year in a depressed economy. We've changed that. Now surely that is not dismissed as simply a non-event and it's business as usual, so it's not business as usual we have a fresh start and now what matters is to use the opportunity of that fresh start in order to build something good on top of it. And we will endeavour to do this.
JC: What if that is the only flexibility they give you though?
YV: I don't believe in hypotheticals that bring people to despair. I think the Europe in the end, in the end, not at the beginning after it has exhausted all alternatives does the right thing.
JC: What about Syriza, what about the party itself, there seems to be divisions right now a core nucleus of those that support you, support Tsipras, but there are those on the more extreme left side that are already criticizing you and saying there were illusions that you built and you were wrong and they've participated in your illusion?
YV: You know Syriza is a very new experience for me. I'm not a party member, I've only become a candidate what was it a month ago, six weeks ago, so it's a new experience. But I can tell you it's like a wonderful, boisterous, cacophonous family, the ones that you really feel you want to belong to and they exasperate you. So… think of Christmas or New Year or with a beautiful family where there are a lot of fights but everyone loves one another.
JC: You can pass reforms without them?
YV: No, no, no, no, our task is to carry the party. And I have no doubt that we shall.
JC: And they'll support you despite the rhetoric that we hear?
YV: They have been doing so far.
JC: How does Greece get back to the markets?
YV: It's a system of three equations and three unknowns. The three unknowns are – the debt level and its flows, secondly investment levels and means of cranking it up, and thirdly primary surpluses. So far, Europe has not managed to solve this system and three unknowns properly. We intend to make sure through rational good quality macroeconomics, that we can convince them that there is a solution that is mutually beneficial for everyone.
JC: And if they can't be convinced?
YV: I have no doubt that Europe in the end is going to solve the system of equations and three unknowns .
JC: And what about further debt write-downs along the line? Do you still maintain that that's part of the plan?
YV: Of course, but that doesn't necessarily mean haircut. What we are going to be proposing to our partners is again with a mentality of a bankruptcy lawyer and somebody who knows how to structure debt efficiently, we are again going to offer them and propose a menu of swaps. The Greek debt comprises many different slices so a swap per slice so as to maximize the net present value for our creditors as well as making possible for us to repay our debts to grow and to end this process.
JC: Do you deny any U-turns in this process?
YV: Yes, I do, because remember, we didn't get elected in order to clash with our partners, we got elected to renegotiate Greece's deal with our partners. What is a negotiation? It's an attempt to find a compromise. The fact that we comprised is not a U-turn. A U-turn would to have been to have led this negotiation to an impasse, that would have been a U-turn and we didn't do that because we were interested in a mutually beneficial agreement.
JC: They didn't clash with you, you clashed with him?
YV: No, one of the things I said from the very beginning is I'm not interested in the language of conflict which I know journalists like, members of the general public like. I despise it. I think the way to understand this is to think of it as an inefficient present in search of an efficient future with common ground which allows mutual gains and it's a question of finding the mutual gains. That is consensual, it is cooperative, none of it is very important. It's important to stop of thinking of chicken games that journalists keep lumping on me and I keep throwing them back and knocking them back because we need to find common ground. And if you think in terms of the chicken game you end up being a headless chicken and we don't want to be that and we don't want anybody to be that.
JC: When I came to visit the finance ministry two weeks ago, I was shocked by how bare the offices were. What position were you left in to go to these negotiations two weeks later?
YV: Well, Greece needs to grow up. Our State needs to grow up. We need to have a smooth transition from one government to the other. This situation that you noticed is a scorched earth. You walk into a ministry and you don't even find a computer on your desk and you have to struggle to find where the wifi is and this continuity of government is the sign of a developed nation and we don't have it in Greece. It is a lot better than what it used to be. But it can get a lot better. It is my ambition that when I leave this ministry the person who is going to, the new minister, especially if the new minister is from a new party they will not find this kind of situation they will be able to start immediately.
JC: How long will you last?
YV: As long as the people of Greece want me to be here, which I hope is not very long.
YV: Of course, I don't want to be a politician. I said I don't want to be a minister, this is a burden.
JC: The opposition are kind of assuming the Syriza party won't last very long. When you went into these negotiations with Europe do you think there were those in Europe that were actually hoping the same?
YV: People tell me that, people tell me that the longevity of certain government depends on our demise. I prefer not to take this seriously, even if it's true. Because when I go into the eurogroup and I go to ecofin when I go to Europe, it's my choice to look at them as partners not as determined foes.
JC: Do you lecture them in meetings?
YV: I've been a lecturer all my life… I've know I have been accused of that. You know what I think the main problem is, that Europe, European finance ministerial meetings and so on are seldom about finance, they're more about process and rules and legalisms and I'm not good at that. I think that when we're talking about macroeconomics, when we're talking about Greece's recovery, I don't think we have the right, the moral right to talk as if this is applying rules.
JC: But do you go in there with facts?
YV: I go in there with facts and I go in there with what I consider to be logic. So when I'm being told that, when I'm being asked a question what will your primary surplus be in 2018, I say well look I cannot answer this question I'm an academic economist, I cannot answer this question until and unless I know what the level of investment will be vis a vis savings and what the current account will be. So they look at me 'so you can't commit' no I can't commit because the mathematics doesn't work out until you know those variables you can't fix the third variable. Or the fourth variable and people think that I'm lecturing them but it's about time we start talking substance and not just rules. Rules are created by the politicians, but the legislature is in order to serve the public interest, it's not the other way around.
JC: So as far as all the rhetoric regarding Germany is concerned do we need to get away from that too because it's not about enemies as far as these two countries are concerned? There was a lot of German rhetoric from the prime minister when he first took over. What's the all about?
YV: When I visited Sr. Schauble and we gave a press conference you may have noticed in my statement to the press that I believe that only the German people can understand us as Greeks because it's only the German people in Europe that have experienced something like this is humiliation after the first world war. A level of debt and reparations or commitment to repayments that was unsustainable and a debt deflationary crisis and a rising Nazi party. I congratulated the German people for having eradicated Nazis from Germany and made the point that this country which fought tooth and nail against the Nazis now has the third largest party in parliament being a Nazi party.
JC: That wins you votes here but isn't that incredibly provocative to people that ultimately are lending you money?
YV: No, why? What I said to them was that I congratulated them for having eradicated Nazis and I called upon them to help us do the same in our country.
JC: Do you admit mistakes have been made?
JV: I am sure mistakes have been made but not the ones I've been accused of. For instance I've been accused of talking ideologically, of confronting my partners and with economic theory, I don't apologize for that. I believe that what is essential in Europe in order to win Europeans back, look Europeans are turning their back on the institutions of Europe and this is a grave danger for Europe and the only way we can turn this tide is by speaking truth to power and truth to our people and we cannot do this until unless we can start speaking substance logically and by placing the interest of the average European, not the average Greek or the German, or the Italian, the average European above anything else. It's the only way that we can consolidate and use this crisis in Europe in order to create a united Europe
JC: Fast forward one year - what does Greece look like?
YV: Hopefully we shall be on the road to recovery and we should no longer be of interest to you.