Greece Says It Is Changing Team That Negotiates With Creditors

By NIKI KITSANTONIS
APRIL 27, 2015

The New York Times

ATHENS — The Greek government on Monday announced a shake-up of its team negotiating with international creditors after the country’s finance minister, Yanis Varoufakis, came under fierce criticism from his eurozone peers last week over a lack of progress in the talks.

The move comes as Greece’s finances are running perilously low, fueling speculation about the country’s defaulting on its debt and possibly being forced to leave the eurozone.

Most European officials have said they want to avoid such a prospect despite having built firewalls against financial contagion since the last major Greek crisis in 2012. But some indicated after a meeting of European finance ministers in Riga, Latvia, that a “Plan B” for Greece was being drafted in case talks collapse.

On Monday, the office of Prime Minister Alexis Tsipras announced the creation of a new “political negotiation team” that will be “coordinated” by a deputy foreign minister, Euclid Tsakalotos, an Oxford University-educated economist whose soft-spoken style contrasts sharply with that of Mr. Varoufakis, who was designated the team’s leader.

The shake-up was interpreted by some Greek news media as a way of sidelining Mr. Varoufakis. Mr. Tsipras’s office, however, expressed support for him, saying he had been “systematically targeted in the international press.”

Opponents of the government led by Mr. Tsipras’s party, Syriza, have publicly criticized Mr. Varoufakis for weeks. On Monday, a prominent conservative and former foreign minister, Dora Bakoyannis, called for Mr. Varoufakis to resign, saying he was a “drag” on the debt negotiations and was undermining Greek national interests.

But the government, after giving Mr. Varoufakis such a prominent stage as an avatar of the austerity-weary Greek people, might find it politically awkward to force him out. That could be a reason for saying he will lead the negotiations, even as Mr. Tsipras is putting less polarizing figures in charge of the day-to-day discussions.

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A European Union official with direct knowledge of the lenders’ talks with Greece hailed the shake-up as a sign that negotiators could start bypassing Mr. Varoufakis, who is deeply disliked by most of his eurozone counterparts for his hectoring tone and pugnacious style.

The shake-up is a “of course necessary step,” said the official, who spoke only on the condition of anonymity because of the secret nature of the talks with Athens. “I think it’s easier doing business with Tsipras and his people,” said the official.

Another European Union official, with direct knowledge of what Greece’s international lenders are seeking from the government in Athens, said of the change announced on Monday, “It is a welcome development which also reflects a more direct involvement of the prime minister in the process.”

But the official, who also spoke only on the condition of anonymity because the talks are at a delicate stage, also warned that “there remains a long way to go to bridge the gaps on the substance” and that “time is very short.”

It was unclear what the changes would mean in practical terms, and whether they would improve efforts to reach a deal between Greece and its creditors before European finance ministers meet again next month. A Finance Ministry official said Mr. Varoufakis would still represent Greece at eurozone meetings, with Mr. Tsakalotos “coordinating policy work in Athens.”

Mr. Varoufakis, after being heavily criticized at the stormy meeting with his eurozone counterparts on Friday, responded defiantly on his Twitter account the next day, quoting President Franklin Delano Roosevelt: “They are unanimous in their hate for me; and I welcome their hatred.”

The posting triggered a stream of angry responses, with many accusing the Greek minister of narcissism.

The shake-up also puts Mr. Varoufakis’s general secretary, Nikos Theoharakis, who has been leading technical talks with creditors, in charge of drafting a growth strategy that, it is hoped, will form the basis of a new deal with creditors in June.

A new team has also been set up to “better support” techical-level representatives of Greece’s creditors, who have struggled to obtain accounting data in recent weeks.

Mr. Tsipras and Chancellor Angela Merkel of Germany spoke by telephone on Sunday and agreed to speak more regularly over the coming days in a bid to improve the chances of reaching a deal, according to Mr. Tsipras’s office.

The pressure on Greece to reach a deal has been rising as the country’s finances run dry.

Greek Finance Ministry officials have indicated that Greece will be able to make about 1.7 billion euros, or $1.8 billion, in payments for salaries and pensions this month, relying in part on money from state entities ranging from local authorities to universities, which have been obliged to hand over their spare cash. The next big test is likely to be a repayment of €750 million to the International Monetary Fund on May 12. That payment is due a day after the next scheduled summit of eurozone finance ministers.

European officials have indicated that Greece must put into effect economic reforms it committed to in February, including changes to the pension system and the labor sector as well as privatizations, to secure funds from an outstanding bailout installment worth €7.2 billion.

But those changes have yet to be made amid strong resistance within the leftist Syriza party. Some government officials have insisted in recent days that Greece should consider early elections or a referendum if talks with creditors collapse, propelling speculation of a default or that Greece will be forced to leave the eurozone.

Guntram B. Wolff, the director of Bruegel, a research organization in Brussels, said that changes in the negotiating team could be helpful but that European officials need to see more convincing evidence.

There was already “a lot of disappointment in almost all euro area countries” with the government in Athens, Mr. Wolff said, and so promises of future action were unlikely to be enough for lawmakers to grant their support.

“Clearly it is difficult for many countries to release money without seeing progress on reforms,” he said.

During the finance ministers’ meeting in Riga on Friday, at least one minister encouraged his eurozone colleagues to consider alternatives plans for Greece in case no agreement was reached with the government.

Dusan Mramor, the Slovenian finance minister, told reporters on Saturday that he had raised the question of “what we will do if the conclusion will not, or the new program will not, be achieved in time for Greece to be able to finance itself or improve liquidity.” A “Plan B can be anything,” he said.

Wolfgang Schäuble, the German finance minister, told reporters on Saturday that he was not planning for the failure of talks with Athens. But he also suggested it would be unwise to make any such planning public because that could cause alarm.

“To ask this question of a responsible politician brings about an insoluble dilemma,” Mr. Schäuble said. “The situation in Greece is as it is.”

Correction: April 27, 2015

An earlier version of this article misstated part of the title of Euclid Tsakalotos. He is a deputy foreign minister, not a deputy finance minister. (The error was repeated in a picture caption.)