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Ex-Greek finance minister Yanis Varoufakis lampoons 'hapless' George Osborne

Published 27/09/2016

Former Greek finance minister Yanis Varoufakis
Former Greek finance minister Yanis Varoufakis

The maverick former Greek finance minister Yanis Varoufakis has lampooned ex-chancellor George Osborne, labelling him "hapless" and urging his successor to make a clean break from his policies.

The firebrand economist told the Press Association that Prime Minister Theresa May and Philip Hammond must abandon austerity and ramp up investment if they hope to get the economy back on track following the Brexit vote.

"George Osborne was caught in a trap of his own making, he kept repeating his commitment to bringing the budget into surplus by 2020, by means of austerity. Every time he cut public spending as a percentage of GDP the public sector borrowing requirement increased.

"Now the obvious thing to do for a successor of such a hapless chancellor is to stop pushing the rock up the hill," Mr Varoufakis said on the sidelines of an Institute of Directors' conference.

Mr Varoufakis, who served in Greek prime minister Alexis Tsipras' government through the country's sovereign debt crisis, during which he lambasted the European Union, said that if Britain is to avoid a recession, it should set up a publicly-owned investment bank.

"My last estimation is that there are £900 billion sloshing around in financial institutions, not being invested in productive activities.

"How do you energise that £900 billion? My view would be that Britain needs an investment bank. A publicly-owned, but not politically-guided, investment bank, which issues bonds that the Bank of England purchases."

He stressed that monetary-easing measures undertaken by the Bank, including slashing interest rates, are not enough on their own to stimulate investment, and that quantitative easing "simply inflates inequality" and that "the asset poor are left behind".

Instead, Mrs May's government should reinvest at least 3% of GDP into an economic recovery programme.

He explained: "If you look at the current account deficit, if you look at the relative growth of demand and supply, and if you look at the diminishing of job quality, the quality of jobs in Britain, it's clear that you need a major boost in investment."

While the former finance minister acknowledged that Britain and Greece are "fundamentally" different, he drew similarities between the "unsustainable economic models" of both countries.

"The British economic model has been unsustainable for decades. Think about it: You have an economy that exports financial services to Europe and the rest of the world. That's the main export."

A report released by the Government's UK Trade & Investment department earlier this year showed that financial and related professional services accounted for about 11.8% of gross domestic product (GDP), employing around two million people across the UK.

But Mr Varoufakis said that financial industry exports have only benefited a small percentage of the population, particularly across the South and South East.

"That leaves the rest of Britain in a depressed state. That's why we had Brexit: not because of foreigners, not because of immigration, it had nothing to do with leaving the EU. It was discontent," Mr Varoufakis said.

"They'd had enough of their prospects being so diminished for so long."

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