With Athens weeks away from running out of cash, and talks with its creditors deadlocked, Greek Prime Minister Alexis Tsipras has reconstructed his team handling the bailout talks with the European Union (EU) and the International Monetary Fund (IMF). This move has been widely interpreted as an effort to relegate Finance Minister Yanis Varoufakis to a less active role in the talks.
An anti-austerity economist, Varoufakis angered peers by returning empty handed from a meeting of eurozone finance ministers in Riga last week, while a default by Athens is seen as more likely every day. The finance minister became an instant celebrity in the first days of the Syriza government with his tie-less look and bold attacks on austerity policies. However, he has lost his popularity in recent weeks and critics have called him a burden in the talks.
Although Prime Minister Tsipras and senior officers publicly voiced support for Varoufakis at a meeting on Sunday, it was agreed he would supervise a new team negotiating a reform deal with lenders.
Deputy Foreign Minister Euclid Tsakalatos has been appointed as the new coordinator of the negotiating team. Tsakalatos is known to be a close Tsipras ally and a soft-spoken economist, liked by the international creditors.
Although some analysts warned that the move was unlikely to pave the way for a better deal, the latest developments suggested Tsipras was accelerating efforts to ease tensions with creditors and reach a deal to unlock the necessary aid. This way Greece can refrain from defaulting on payments, which could lead to a potential “Grexit.”
In his first major television interview since being elected in January, Prime Minister Tsipras also raised hopes of a deal by asserting that he was confident of an outline of a deal with creditors being produced by May 9. This is just a couple days before a debt payment is due to the IMF of about €750 million.
Tsipras said Greece was the at final steps of negotiations despite differences on labour reform, pension cuts and a proposed value-added tax hike on tourist islands. He also said Greece was hoping for a €3-5 billion prepayment of future profits if it strikes a deal with Russia over the Turkish Stream gas pipeline project.
However, according to a survey by German research group Sentix, around half of investors expect Greece to leave the eurozone within the next 12 months. Sentix’s eurozone breakup index for Greece increased to 48.3 percent in April from 35.5 percent in March. The survey shows the same level as during the most acute phase of the eurozone debt crisis in 2012.
But Sentix’s index measuring the risk of contagion from Greece’s debt contagion fell to a record low of 26.1 percent, signaling that investors are not expecting Greece’s problems to spread to other parts of the monetary union.