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Finance Minister Varoufakis Pulled Back from Greek Debt Negotiations

Bloomberg Business understandably sees all sorts of signals in Greece’s decision to pull Finance Minister Yanis Varoufakis back from bailout negotiations, a move it describes as “clipping Varoufakis’ wings” and “reining him in” after three months of debt talks failed to produce an agreement.

Mixed animal metaphors aside, it was clear Varoufakis had to go, and the handover of front-line negotiations to Deputy Foreign Minister Euclid Tsakalotos will be seen as a shift in Greece’s posture. Bloomberg Business reports the Eurogroup meeting in Riga, Latvia, on Friday “descended into name-calling as the currency bloc’s finance ministers hurled abuse at their Greek colleague, accusing him of being a time-waster, a gambler and an amateur.”

Greek President Alexis Tsipras evidently got the message sent by Varoufakis’s opposite numbers from Greece’s creditor nations. Royal Bank of Scotland strategist Michael Michaelides thought the Varoufakis pullback represented Tsipras looking for a way to give ground without appearing to surrender: “It doesn’t change the issues, but given the interpersonal nature of the Eurogroup, and since the finance ministers still remain in charge, this is significant.”

Perhaps it is not significant enough, since some European officials apparently think Tsipras acted too late, and a nuanced signal sent by reshuffling the roster of Greek negotiators isn’t enough to break the bailout stalemate. Greece is out of time and out of money, the most lethal combination in the world of big spending and big debt.

The central government wants to pull cash from Greek municipalities to meet its short-term obligations. Local governments don’t want to hand the money over until they’re told exactly how it will be managed. Europe doesn’t want to extend any more credit unless the bailout terms Tsipras and Varoufakis have been denouncing as inflexible and cruel are met. The Europeans are also tired of being denounced as inflexible and cruel.

As for the Greek public, they’re said to be personally fond of Varoufakis but also increasingly uneasy about the Tsipras government’s confrontational stance against Europe. “The Greek people are absolutely clear that they want to stay in the euro come what may,” University of Athens law professor Aristidis Hatzis told Bloomberg Business. “They’ve understood that it will require hard compromises, even austerity.”

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