Documents Distributed by Greece’s Yanis Varoufakis Baffle Eurozone Officials

Officials say files differ greatly from what has been discussed in technical talks in Brussels

 The Wall Street Journal

By VIKTORIA DENDRINOU

Updated May 8, 2015 3:38 p.m. ET

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BRUSSELS—Economic plans and growth estimates distributed by Greek Finance Minister Yanis Varoufakis to some of his eurozone counterparts have baffled officials involved in the talks over its international bailout.

Officials say that the files differ greatly from what has been discussed at the technical level in Brussels in recent days and underline how Mr. Varoufakis continues to complicate progress toward a financing deal.

The 36-page document, entitled “Greece’s recovery: A blueprint” and seen by The Wall Street Journal, was presented by Mr. Varoufakis to his counterparts in Paris and Rome, as well as senior officials in Brussels, while he was touring European capitals over the past week, according to four European officials.

Mr. Varoufakis declined to comment on the document Friday in Madrid after meeting with Spanish Finance Minister Luis de Guindos.

The Greek Finance Ministry said the document was a first draft of a new plan “for the recovery and growth of the country in the [post-bailout] era,” which it said Mr. Varoufakis had discussed informally with some of his counterparts.

“This is a long-term project that goes well beyond the limits of the negotiation that is currently underway in the Brussels Group,” as the group of experts representing Greece and its creditors is known, the ministry said.

Greece’s leftist-led government is locked in negotiations with the European Union and the International Monetary Fund over its next slice of financial aid as part of a €245 billion ($276 billion) rescue package.

Disagreements over cuts to Greece’s pension system and changes to its labor rules that would make it easier to dismiss workers have held up a deal on further loans.

While the talks have become more constructive, differences remain wide, European officials say.

The paper focuses on the Greek economy and how it can return to growth. “Perhaps it is time to visualize a recovering Greece before we unlock the present impasse,” the document says, before going into areas where the country plans overhauls.

While some of the outlined measures are the same as those agreed to in the negotiations—such as the creation of an independent tax commissioner—the paper differs in other areas.

One significant difference is the creation of a so-called bad bank that would house and wind down Greek lenders’ bad loans. “Conveniently, the financing of the bad bank is not treated,” an EU official said.

“There is hardly any connection between his blueprint and the ongoing negotiations,” the EU official said. “It seems like a fine program for a country that does not have any financing problems, but just wants to catch up and be a nice tourist destination.”

Mr. Varoufakis’s document also predicts Greece’s economy will grow just 0.1% this year, less than the 0.5% forecast this past week by the European Commission. For 2016, his files expect 2% growth, also below the 2.9% forecast by the commission.

In Brussels, Greek officials have been pushing the commission to raise its growth estimate. The lower the forecast, the higher the projected deficit and the more the government will need to do to close it.

The Greek Finance Ministry said differences in forecasts stem from different assessments of the impact of deflation on the economy.

“The problem is that Varoufakis doesn’t seem totally in line with” Greek Prime Minister Alexis Tsipras, another official said, adding that it isn’t clear to what extent the files represent the government’s position.

Some officials, however, played down the significance of Mr. Varoufakis intervention and point to a shuffling of Greece’s negotiating team over a week ago, in which the finance minister’s influence was reduced.

Still, the confusion is likely to further impede progress in negotiations.

Greece has been draining cash reserves in recent months to pay government salaries and pensions, while also meeting its debt repayments. The next big hurdle is a €750 million loan repayment to the IMF due Tuesday. The government made a smaller payment this past week.

While Greek and EU officials have expressed concerns about whether the country can make the next payment, Mr. Varoufakis, speaking at a business conference in Brussels on Thursday, suggested such concerns were unfounded. “We certainly intend to pay the IMF,” he said.

Write to Viktoria Dendrinou at viktoria.dendrinou@wsj.com