Varo­ufakis pushed out of Eu­rogroup ne­go­ti­a­tions

Financial Mirror (Cyprus) - - FRONT PAGE -

“At last, Greece may be about to step back from a po­ten­tially dis­as­trous de­fault,” was how the Econ­o­mist re­ported on Fi­nance Min­is­ter Ya­nis Varo­ufakis be­ing side­lined by Prime Min­is­ter Alexis Tsipras in an ef­fort to res­cue the ne­go­ti­a­tions with the Eu­rogroup.

The sud­den de­mo­tion of Varo­ufakis, the ar­gu­men­ta­tive fi­nance min­is­ter, sug­gests a last-minute pol­icy switch by Tsipras, one which could re-in­vig­o­rate frac­tious bail-out ne­go­ti­a­tions with the coun­try’s in­ter­na­tional cred­i­tors, the Econ­o­mist added.

A deal would un­lock EUR 7.2 bln of much-needed bail-out aid. The gov­ern­ment is al­ready strug­gling to pay pen­sions and state sub­si­dies for April (it has scratched to­gether enough money for salaries) and has strong-armed lo­cal au­thor­i­ties to hand over EUR 2 bln of spare cash to cover pay­ments un­til mid-May. With­out an agree­ment with its Euro­pean cred­i­tors and the IMF, Greece faces a near-cer­tain de­fault in June.

Of­fi­cially, Varo­ufakis was moved side­ways: he will sit on a new eco­nomic pol­icy com­mit­tee and con­tinue to at­tend meet­ings of Eu­rogroup fi­nance min­is­ters, ac­cord­ing to gov­ern­ment of­fi­cials. But he is no longer man­ag­ing the bailout talks. That job has gone to Eu­clides Tsakalo­tos, an Ox­ford-ed­u­cated econ­o­mist and, un­like Varo­ufakis, a longserv­ing mem­ber of Syriza, the rul­ing party.

Tsakalo­tos, an­other fer­vent left-winger, will in turn be closely su­per­vised by Yan­nis Dra­gasakis, the prag­matic deputy pre­mier and Tsipras’s en­forcer. At the same time, Gior­gos Chou­liarakis, also in Dra­gasakis’s camp, takes over from Ni­cos Theocharakis, a friend and aca­demic col­league of Varo­ufakis, to han­dle day-to-day ne­go­tia­tons with the EU and In­ter­na­tional Mon­e­tary Fund.

There are other signs that a com­pro­mise may be in the works. Tsipras pre­dicted in a late-night tele­vi­sion in­ter­view on Mon­day that a deal may be reached by May 9: three days be­fore Greece is due to re­pay EUR 750 mln to the IMF. In a nod to Syriza’s restive far-left wing, he also threat­ened to hold a ref­er­en­dum if the lenders try to push Athens too far. Mean­while, the fi­nance min­istry is rush­ing to com­plete a draft bill con­tain­ing re­form mea­sures for which in­ter­na­tional lenders have been push­ing since the Syriza-led gov­ern­ment came to power in Jan­uary. Th­ese in­clude a move to ce­ment the in­de­pen­dence of the chief tax col­lec­tor and to auc­tion off new tele­vi­sion li­cences.

Mar­kets showed only mod­est in­ter­est in the new de­vel­op­ments, the Econ­o­mist re­port said, adding that in part that re­flects the fact that few large in­vestors are plac­ing bets on Grexit, one way or the other. But it also re­flects an as­sess­ment that it is too early for eu­pho­ria over a Greek deal with the Eu­rogroup. Varo­ufakis’ flam­boy­ant style and er­ratic ne­go­ti­at­ing po­si­tions have been blamed for much of the dif­fi­culty Greece has had ne­go­ti­at­ing since Syriza took power.

But the fun­da­men­tal ten­sions are be­tween Syriza’s need to show its vot­ers that it has won some of the con­ces­sions from Europe that it was elected to ex­tract, the dif­fi­culty of as­sert­ing the gov­ern­ment’s author­ity over Greece’s oli­garch class, and the Euro­peans’ un­will­ing­ness to re­lease funds un­til they see ev­i­dence of fis­cal and struc­tural change in Athens. Those un­der­ly­ing prob­lems will not dis­ap­pear just be­cause the Greek gov­ern­ment has swapped a leather jacket for a tie.

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