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Varoufakis: A 10-year-old could see bailout was wrong

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Yanis Varoufakis, the controversial former Greek finance minister, has told CNBC that even a child could see why the Greek bailout was not going to work.

"A 10-year-old with some basic mathematics skill would know that if you have an unsustainable debt and you try to solve it by pretending that it is a problem of liquidity and piling up on it the largest loan in history on conditions of stringent austerity, … a 10-year-old knows that cannot end well," he said on Friday in London.

Varoufakis, an economist by profession, became the focal point for criticism of Greece for not accepting the austerity program, despite other programs being accepted by bailed-out countries like Portugal and Spain.

The fallout from austerity and Greece hovering perilously close to leaving the single currency have led many to question whether the euro can survive in its current form.

Former Greek finance minister Yanis Varoufakis.
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The embattled Mediterranean country eventually accepted another bailout with controversial austerity conditions, as the threat of Greece having to leave the euro zone in a disorderly fashion loomed.

"We have a chessboard and Greece is just a little pawn to be sacrificed," Varoufakis said.

German Finance Minister Wolfgang Schaueble was often viewed as the most pro-austerity voice in the negotiations over Greece's fiscal difficulties and the two men seemed at cross purposes in the tortuous discussions.

Varoufakis maintained that their inability to reach a compromise was just because "the euro is badly designed."

"We agreed on a number of issues, but not how to solve this," he said.

Varoufakis resigned as finance minister this summer after a brutal six months attempting to re-negotiate the austerity conditions of Greece's bailout by international creditors, .

He praised European Central Bank President Mario Draghi, who he described as "an exquisite central banker" - even though the ECB restricted funding to Greek banks earlier this year in a move which stymied the country's banking system.

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Greece's former prime minister and Syriza leader, Alexis Tsipras, is still a personal friend and an "excellent politician," said Varoufakis.

The third bailout is "unviable on an economy which is in this great depression and debt spiral," Varoufakis said.

Varoufakis was backed up by fellow economist Philip Legrain, who is a former economic adviser to the President of the European Commission and author of "European Spring", author of European Spring.

"Alexis Tsipras was wrong to back down, he should have gone with Yanis Varoufakis' plan to introduce a parallel currency instead of folding at the last minute and agreeing to these desperately onerous conditions, which are only going to repeat the mistakes of the past," Legrain told CNBC on Friday.

Tsipras has recently called new elections in Greece, the second within a year, but Varoufakis, who is not standing for re-election, said: "I cannot look my electors in the eye and say to them that our party is capable now of stabilizing the economy."

Two opinion polls by Greek research companies published on Wednesday showed Syriza's lead over the centre-right New Democracy party shrinking from 2.5 per cent to around to 1 per cent this week, according to the Financial Times.

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Former Prime Minister Tsipras, who stepped down ahead of the new election, is facing a split within his own party Syriza between pro- and anti-bailout forces.

Varoufakis also said that he doesn't think Tsipras, who is currently campaigning for re-election as its Prime Minister, believes in the conditions of the country's third bailout.

"He considers it to be unreliable, as does the IMF," Varoufakis said.

The economist, who admitted he was "not a very good politician", is still proud of Syriza's actions this year.

"We gave Greeks their dignity back because we stood up and said we don't want more loans until we stabilize the economy," he told CNBC.

Should Greece have introduced a parallel currency?
Should Greece have introduced a parallel currency?