World & Nation

Greek warning: With no rescue funds, ‘there could be problems’

Greek Finance Minister Yanis Varoufakis in Venice
Greek Finance Minister Yanis Varoufakis arrives at a conference at the Aspen Institute in Venice, Italy, on Saturday.
(Davide Bolzoni / European Pressphoto Agency)

Greece’s pugnacious finance minister warned Sunday that Athens could call a referendum or take the country on an early trip back to the ballot box if international creditors do not move to unlock desperately needed rescue funds for the cash-strapped country.

Yanis Varoufakis made the comments hours ahead of a crucial meeting of the 19 Eurozone finance ministers, who were gathering in Brussels on Monday to review a rash of radical reforms that creditors and the freshly elected government in Athens must agree upon for further bailout funds to be disbursed to Greece.

If the money isn’t released, Varoufakis said in a newspaper interview, “there could be problems.”

“The country could go back to elections. It could [also] call a referendum,” he warned. “[We] are not glued to our seats yet,” he said of the left-wing Syriza party, which won election in January, vowing to tear up Greece’s loan agreements and end five years of brutal austerity.


Still, what seemed to be a dream job for the communist-rooted party two months ago is now turning into somewhat of a nightmare.

With the country’s cash reserves rapidly being depleted, tax receipts shrinking and the economy drifting back into recession, Greece could face default by the end of the month, when more than $7 billion in loan repayments must be made.

“The situation is breaking down again and the possibility of a cash crunch is real,” said Mujtaba Rahman of the Eurasia Group risk consultancy. “The Greeks’ proposed reforms aren’t going to be taken seriously by the Eurogroup.”

In an 11-page letter of proposals drafted by Varoufakis, sent to Brussels on Friday and leaked to the news media over the weekend, one suggestion to prop up the economy involved wiring housewives, students and tourists for sound and video to spy on tax dodgers.


The finance minister explained that the inspectors would be “hired on a strictly short-term basis” and their findings used by tax authorities as “evidence collected immediately to issue penalties and sanctions.”

Most important, the minister wrote, the plan would “engender a new tax compliance culture” in a country ranking among the most corrupt in the European Union. In the same letter, meantime, Varoufakis conceded that while the backlog of tax arrears had amassed to $82.4 billion since the start of the crisis in late 2009, only $8.6 billion seemed recoverable.

Six other proposals included in the letter promised to improve budgetary procedures, streamline spending in public administration and alleviate a humanitarian crisis gripping more than 300,000 poverty-stricken Greeks.

One other novel idea presented by the leftist government of Prime Minister Alexis Tsipras includes the introduction of a smart card, which holders can use for health insurance while redeeming food stamps worth about $100 a month.

Under a deal sealed with its lenders just two weeks ago, Greece was given a four-month extension to its running loan program provided it produced a comprehensive list of belt-tightening measures.

Officials close to the negotiations said Athens has been “tweaking the list of measures” throughout the weekend to appease lenders’ concerns. The newspaper To Vima reported that a “secret game of bargaining swaps” was taking place between Athens and Brussels, potentially leading to added sales tax hikes and the sale of state companies – both moves that Syriza campaigned strongly against in the election.

Whatever the outcome, pundits and politicians warn, the specter of a third bailout package looms.

“Greece has two options left,” said Michael Argiriou, director of International Economics at the Cardiff Business School. “Either it defaults on its obligations and leaves the Eurozone or [it] agrees to a third bailout.”


Carassava is a special correspondent.