In a dire warning to Brussels, Mr Varoufakis said the fallout from the crisis would result in Matteo Salvini, leader of the right-wing Lega party, replacing Giuseppe Conte as Italy’s Prime Minister – and swiftly moving to ditch the euro. EU27 leaders will on Thursday discuss the way forward as they consider a 500 billion package of measures thrashed out at a meeting of the Eurogroup, consisting of the bloc’s 27 finance ministers, on April 9. It comes as the total number of COVID-19 cases worldwide today passed the 2.5million mark, according to Johns Hopkins University’s Coronavirus Resource Centre. However, Mr Conte has already warned he is ready to refuse to sign off on the proposals, and is pushing for a system of eurobonds – nicknamed coronabonds – meaning liability for debts would be spread across member states, rather than the responsibility of individual countries.
Mr Varoufakis, a member of Greece’s Parliament who served in Prime Minister Alexis Tsipras’ government in 2015, and an advocate of such a system of debt mutualisation, was similarly unimpressed.
He told Portuguse radio station TSF: “To begin with, the 500 billion euros is almost entirely loans.
“It’s exactly what Europe doesn’t need, especially like the countries that were hit the hardest, like Italy or Spain or Greece, which have the least capacity to have the necessary increase in public debt.
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Former Greek Finance Minister Yanis Varoufakis
“The reason why the eurobonds – that nine countries, including Greece and Portugal, demanded – are essential is because it constitutes a debt restructuring, so that debt does not go to the nations, it is spread out across Europe.
“By being spread out, its total net present value shrinks over the next 20 years and therefore it’s far more manageable.”
Rejecting eurobonds and instead asking countries in southern Europe to take money from the European Stability Mechanism – in other words, take out loans – would ensure high levels of austerity for numerous countries across the bloc, he explained.
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I just don’t see that the eurozone can survive this second wave
He added: “This is going to magnify ridiculously imbalances that area already a problem in the eurozone, to such an extent that the politics, specially in come southern countries like Italy, for instance, will become toxic and I just don’t see that the eurozone can survive this second wave in the same error category that we made in 2010 when it treated our countries’ problems, which were insolvency, like something that can be dealt with by means of loans.”
There was no indication Thursday’s meeting would result in any softening of the stance of countries in the north of the bloc when it came to debt mutualisation, Mr Varoufakis said.
He added: “If this crisis has not changed the mind of the ruling classes in Germany, the Netherlands, Finland and Austria and so on, persuading them that this is a time for Euro bonds, for unification rather than ‘everyone by themselves’, I can’t see why they would change their minds in the future.
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Angela Merkel, Germany’s Chancellor
“This is why I think April 9 is going to be remembered as the moment when the disintegration of the European Union and the monetary union in particular has begun.”
Asked whether the crisis had the potential to destroy the eurozone, Mr Varoufakis said: “There’s no doubt it will, if we continue down this road.
“Italy is going to have to borrow huge quantities of money, and there will be a GDP collapse of at least 10 percent. The debt to GDP ratio will go up to 180 percent or more very soon.
“The deficit will be gigantic: 15 percent, maybe 20 percent.
“Brussels will next year say: ‘You will have to go from, let’s say, 18 percent to seven percent’.
“That’s an 11 percent GDP austerity program. Any government that implements an 11 percent austerity program will be out very soon.
“Matteo Salvini is going to ride into government and I can assure you the first thing he will do is a plan for the exit of Italy from the Euro. When Italy is out, we’re all out.”
In a stinging attack on the Eurogroup and its president, Portugal’s Mario Centeno, Mr Varoufakis added: “There’s no doubt the disgraceful Eurogroup that Mr Centeno presided over has condemned the eurozone to be the sick economic block of the world.
“China, the United States and the United Kingdom will have a much faster recovery.
“The lack of a fiscal boost in the eurozone will guarantee we will exit this crisis with our economies much weaker and the imbalances between north and south countries far worse.”