Speaking to Italian daily La Stampa, the former Greek finance minister claimed the bloc’s Recovery Fund project will not be sufficient to save the eurozone from its imminent collapse.
Mr Varoufakis warned the Brussels bloc can only get weaker from now as “too little too late” was done to ensure economic recovery from the pandemic across the continent.
Asked whether the EU will come out stronger from the COVID-19 disaster, he said: “Much, much weaker.
“Investment fell during 2020 by 50 percent and the output gap grew to 8 percent.
“The Recovery Fund will only make up for, at best, one-eighth of this over the next few years.
“It is too little and it will come too late to prevent another wasted decade for the eurozone.”
The Greek politician also warned Italy’s new Prime Minister and former European Central Bank chief should be frank with Italians about the shortcomings of the EU’s recovery project.
He said: “The time has come to inform the Italian public of how hopelessly inadequate the Recovery Fund is.
“To begin with, €120 of these billions are loans, which is the last thing Italy needs as loans cannot ameliorate the insolvency problem at hand.
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In 2012, at the height of the eurozone crisis, Mr Draghi told eurozone leaders they should have accepted more transfer of powers.
During a meeting of the eurozone’s central bank governing council, Mr Draghi explained that governments had to stick to tighter budgets, while reforming labour markets, increasing competition, re-balancing employment towards young people.
He said: “I can understand the anger of young people, of poor and jobless young people.
“I can understand it very well.
“The answer we can give as policy makers is that the policies suggested or implemented are the policies we are convinced to be the right ones.”
Also part of his vision of a “growth compact,” Mr Draghi backed calls for a boost in the resources of the European Investment Bank and said EU funds needed to be “redirected” to low-income areas.
He added: “But thirdly and most importantly is that we collectively have to specify a path for the euro. How do we see ourselves in 10 years from now… We want to have a fiscal union?
“We have to accept the delegation of fiscal sovereignty from national to some form of central [government].”
Despite Mr Draghi’s comments, eurozone leaders never got round to establishing a fully-fledged fiscal union.
However, in October, German Finance Minister Olaf Scholz said Brussels was taking a step towards a fiscal union with its plans to recover from the coronavirus pandemic – which involve the European Commission borrowing in financial markets.
Mr Scholz told an inter-parliamentary conference on stability, economic coordination and governance in Brussels: “We are moving towards fiscal union, a major step forward in the financial capacity and sovereignty of the EU.”
Europe’s economic pain is expected to worsen before it gets better, potentially boosting the popularity of populist leaders and the need for more action from the European Central Bank, analysts have warned.
While the International Monetary Fund upgraded its global growth forecasts at the end of January, it said the outlook for the eurozone had deteriorated.