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Yanis Varoufakis: Coronavirus economic fallout could heap more misery onto Greece

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By Natalie Huet
Former Greek Finance Minister Yanis Varoufakis at a news conference about the launch of the left-wing 'Democracy in Europe Movement 2025' in Berlin, Germany, Feb. 9, 2016
Former Greek Finance Minister Yanis Varoufakis at a news conference about the launch of the left-wing 'Democracy in Europe Movement 2025' in Berlin, Germany, Feb. 9, 2016   -   Copyright  AP Photo/Markus Schreiber

Greece has done a good job containing coronavirus but it’s likely to be the hardest hit by the pandemic's economic fallout, the country’s former finance minister, Yanis Varoufakis, has told Euronews.

Greece shut down schools and imposed restrictions on its citizens from mid-March, and its nationwide lockdown has been just been extended to May 4. 

The country has so far reported just over 2,400 cases of COVID-19 and 121 deaths, and former Prime Minister George Papandreou told Euronews it had emerged as an example to many other European states.

"We’ve had a major success (…) in keeping the death toll low," Varoufakis said in a separate live interview on Euronews Now.

"But I very much fear that Greece will have the largest number of people who go hungry as a result of the economic dimension of this pandemic." 

The country "never recovered" from the 2009 financial crisis, Varoufakis said, noting that its GDP was still a quarter below its level a decade ago.

After years of austerity, recession and stagnation, the Greek economy was, however, showing timid signs of an upswing, and GDP was expected to grow between 2 and 3 per cent this year before the coronavirus crisis hit. 

According to the IMF’s latest forecasts, Greece’s GDP is now expected to drop by 10 per cent this year. This would make the Greek economy the hardest hit across the Eurozone.

"It can’t be business as usual" once the lockdown ends, warned Varoufakis, who is now the leader of the Greek left-wing party MeRA25.

He said banks should not continue to sell non-performing loans to funds and put homeowners at risk of foreclosures – especially after people have been asked to stay indoors for weeks on end to contain the spread of COVID-19.

"Imagine if once they’re out of their homes, we take their homes away, on behalf of vulture funds that have purchased them," Varoufakis said.

'It all depends on Europe'

The solution to this crisis depends on the European Union, Varoufakis said, speaking just hours before EU leaders were due to hold a summit over videoconference to discuss how to fund the bloc's recovery.

"I very much fear it will be another demonstrable failure by our leaders to do what is right not for Greece, but for Europe as a whole," he said.

"Again they are kicking the can down the road, just like in 2010 (…) They dealt with that crisis as if it was a crisis of liquidity when it was a crisis of bankruptcy. And they are doing the same thing at the European level now."

The European Commission has suggested borrowing on the market against the security of the EU's budget – and make cheap loans to national governments to help them weather the crisis. But this raises the issue of loans, which will eventually need to be repaid, versus grants that would not.

"Every billion or trillion they are referring to is loans," Varoufakis said. "The last thing businesses in Germany, in Italy, in France, in Greece need now is loans – you need loans when you have a liquidity crisis."

Varoufakis gave two examples of what he thinks should be done instead.

"The European Investment Bank could be given the green light to fund a major investment programme of €600 billion – 5 per cent of GDP – supported by the European Central Bank," he said.

"The European Central Bank could be issuing its own Eurobonds on behalf of the whole of the Euro area, not pushing more debt onto the shoulders of the Italian state, the Spanish state, the Greek state that cannot shoulder it," he added.