Varoufakis: Demand for further public sector austerity irrational

Speaking to Business Spectator, the electronic issue of "The Australian" newspaper, the Greek FinMin presented the current situation of the Greek economy, after an unprecedented reduction of public and private spending and an accumulated 30 pct decline in the country's GDP, while the troika was demanding further reductions and austerity.

Commenting on the domestic labor market, Varoufakis said it was in "full disorder" because of the recession which has led to a "breach" of labor legislation both in wages and working hours. Referring to the public sector he said that wages have collapsed, while workforce was reducing either through retirement or other ways, expect from dismissals. He noted that a troika demand for a further shrinking of the public sector lacked rationale since public sector workers had the remaining purchasing power to move the market.

Varoufakis said the solution to the current problem of the Eurozone economy would be "a direct recapitalization of banks, a unification of the banking system and at the same time decoupling the crisis of the banking system with the economic crisis of any member-state, under the full responsibility of the European Central Bank".

The Greek FinMin said that a Greek exit from the euro and its return to the drachma, following the example of Argentina, could be an option but it would lead to a full collapse of the banking system for months without any capability of borrowing, along with the obvious shortfall in currency. Varoufakis said that several enterprises have abandoned Greece because of the uncertainty over its stay in the Eurozone, but noted that this situation will continue not only for Greece but for other countries in the EU's region as long as the crisis in the Eurozone was not addressed as a systemic problem, but as a debt crisis of each member state, by approving expensive loans with no realistic prospect of repayment.