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26/09/2016

Greece reshuffles EU-IMF team, defends Varoufakis against ‘manipulated’ media attacks

Euro & Finance

Greece reshuffles EU-IMF team, defends Varoufakis against ‘manipulated’ media attacks

Ex-Finance Minister Yanis Varoufakis voted in favor of the reforms. [European Council]

Greek Prime Minister Alexis Tsipras shook up the team handling crucial talks with its creditors Monday (27 April) after relations between his embattled finance minister and the EU hit a new low.

A government statement said a “political negotiation team” would be formed under junior foreign minister Euclid Tsakalotos, a 55-year-old Dutch-born economics professor, to assist the troubled talks after months of fruitless discussions on Athens’ new loan deal.

The financial press widely reported the move as an attempt to sideline Finance Minister Yanis Varoufakis, whose negotiating style has infuriated Brussels.

But the leftist government in Athens insisted that it would continue to support the maverick economics professor against “manipulated” media attacks.

A government source claimed that the changes did not affect Varoufakis, who will be in charge of Tsakalotos’ “political team”.

“This changes nothing as far as Varoufakis is concerned,” the official told AFP. “He will continue to represent Greece at Eurogroup meetings.”

The move on Monday came after a stormy Eurogroup meeting in Riga last week where Varoufakis was reportedly “isolated” by his fellow finance European ministers.

He reacted by quoting former American president Franklin Delano Roosevelt (FDR), who spurred major reforms in the United States after the Great Depression.

‘I welcome their hatred’

“FDR, 1936: ‘They are unanimous in their hate for me; and I welcome their hatred,'” Varoufakis tweeted on Sunday.

Analysts saw Greece’s reshuffling of its negotiators, with another coordinating team to be formed to support talks with EU-IMF officials in Athens, as a bid to placate its creditors.

“To bypass Varoufakis and make clear the seriousness of the situation to the Prime Minister directly following the Riga shouting match between finance ministers, Eurogroup chief Jeroen Dijsselbloem reportedly phoned Tsipras after the meeting,” Christian Schulz, a senior economist at Berenberg said.

“Tsipras called German chancellor Merkel on Sunday, with German sources describing the tone of the talk as ‘positive’. However, as long as the institutions and eurozone finance minister can’t certify that Greece is doing the requested reforms, Greece can’t get fresh money,” he added.

Greece has been trying to negotiate a deal that would unlock €7.2 billion in remaining EU-IMF bailout money that the debt-ridden country needs to avoid default and a possible exit from the euro.

But the government in Athens, elected in January on an anti-austerity ticket, has resisted pressure to continue with a policy of cuts in return for the cash.

A survey published Sunday showed that seven out of 10 Greeks want their leaders to reach an agreement with their creditors, and gave Varoufakis an approval rating of just over 51%.

Tsipras ‘more central’

A self-styled “erratic Marxist”, Varoufakis, 53, courted controversy in March when he and his wife posed for glitzy Paris Match magazine inside their beautiful Athens apartment.

The minister was also placed on the defensive that month after being accused of raising his middle finger to eurozone paymaster Germany in a 2013 speech.

Varoufakis insisted that the video footage had been “doctored”.

The Financial Times on Monday said Tsipras planned to take a more central role in the negotiations, and the right-wing German tabloid Bild said that Athens was prepared to back down on several fronts.

So far, the Greek government has resisted new pension caps, the elimination of some VAT exemptions, and no longer wants to use privatisation proceeds to repay state debt.

Greece needs a deal as it is slowly running out of money to pay salaries, pensions and its international debt obligations.

The government has tried to round up cash from the reserves of state companies and local councils after Greek banks were restricted by the European Central Bank from buying state bonds.

Athens needs to repay some €950 million to the IMF by May 12, and its total debt repayment load in June exceeds €3.6 billion.

Background

On 20 March, the European Commission offered Greece funds to deal with what it called a humanitarian crisis, after Prime Minister Alexis Tsipras vowed to clarify bailout reform pledges demanded by creditors.

Following crisis talks between Tsipras and European leaders, EU Commission chief Jean-Claude Juncker said he was making available €2.0 billion in unused EU structural funds to Greece.

>> Read: Greece promises to deliver full reform list after three-hour 'mini summit'

Greece secured a four-month extension of its financial rescue on 24 February, when its eurozone partners approved an economic reform plan that backed down on key measures and promised that spending to alleviate social distress would not derail its budget.

>> Read: Eurozone approves Greek reform plan with reservations

Germany's rejection of an initial Greek request for a six-month loan extension forced Athens into a string of politically sensitive concessions, postponing or backing away from campaign promises to reverse austerity, scrap the bailout and end cooperation with the Troika of EU, ECB and IMF inspectors, which are now called "the institutions".

>> Read: Greece, eurozone agree to four-month loan extension, avert crunch