Yanis Varoufakis sidelined from Greek debt talks

Greek prime minister Alexis Tsipras has reshuffled his team handling talks with European and IMF lenders, a move widely seen as an effort to relegate embattled finance minister Yanis Varoufakis to a less active role in negotiations.

An anti-austerity economist who has angered peers with his brash style, Varoufakis is facing calls to quit after returning from a meeting of eurozone finance ministers in Riga isolated and empty-handed while Athens scrambles to avoid bankruptcy.

Tsipras and senior aides publicly voiced support for Varoufakis at a meeting on Sunday and agreed the finance minister would supervise a new team negotiating a reforms deal with lenders, a government official said.

Deputy foreign minister Euclid Tsakalotos — a close Tsipras ally and soft-spoken economist liked by officials representing creditors — was named co-ordinator of the group, the official said. This would elevate him from his current position and give him a more active role in the negotiations, pushing Varoufakis to the sidelines.

The latest developments suggested Tsipras was ramping up efforts to ease tensions with lenders and strike a deal to unlock aid so Greece can avoid defaulting on payments, which could force it out of the 19-nation eurozone.

The news spurred a rally in Greek stocks and bonds. Greek two-year bond yields fell 250 basis points to a two-week low of 23.55% after the news, reversing an earlier rise. Athens stocks rose 4%, while Greek bank shares jumped 9%.

Eurozone officials welcomed the reshuffle and the apparent effort to reduce Varoufakis’ role in negotiations.

“The way he behaved made him an additional obstacle in the negotiations with Greece,” said a eurozone official, who asked not to be identified. “By diminishing his role, from the main contact person to one of the persons, removes the obstacle. It has become almost personal for some in the eurogroup.”

Another eurozone official questioned whether the move would bring about the substantive change lenders have been demanding.

Varoufakis, who became an instant celebrity in the early days of the Tsipras government with his casual look and blunt attack on austerity policies, has seen his star wane in recent weeks and critics have called him a liability in the talks. At Riga on Friday, he was sharply criticised by fellow eurozone finance ministers for both his lecturing style and failure to produce reforms demanded by lenders.

In another move hinting at a less prominent role for Varoufakis, his general secretary Nikos Theocharakis, who had been leading technical-level talks with the so-called Brussels Group of lenders, will now focus on drawing up a plan for growth to be the basis for a deal with lenders in June.

Reuters