'Varoufakis problem' weighs on Greek debt talks

By Reuters

Mar 18, 2015 09:08 AM EDT

With incendiary interviews, an undiplomatic demeanor, a celebrity photo shoot and an obscene finger gesture, Yanis Varoufakis is becoming part of Greece's debt problem rather than the solution, or so his euro zone partners believe.

Many Greeks regard their new finance minister as a breath of fresh air, a man who has told his colleagues in the Eurogroup a few home truths about the futility of forcing austerity policies on an economy that has endured a depression for five years.

But his readiness to break the conventions of European discourse has caused consternation, and not just among the buttoned-up finance chiefs and bureaucrats who populate the Eurogroup.

The 53-year-old academic economist, who calls himself an "erratic Marxist", roared to prominence when the leftist Syriza party won an election in January and Prime Minister Alexis Tsipras chose him as finance minister.

Less than two months into the job, he has alienated many interlocutors in Berlin, Brussels and Frankfurt, and risks becoming a liability as Greece struggles to avert bankruptcy and stay in the euro zone.

To Greeks, he is at last fighting the country's corner with a vigor they feel the previous conservative-led government lacked. Polls show the government still commands public support in the negotiations, even though it has achieved little.

Varoufakis, whose relations with veteran German Finance Minister Wolfgang Schaeuble have deteriorated sharply in recent weeks, was not available for comment. However, a Greek official said Varoufakis's "intellectual charisma" aroused admiration and scorn. "His cool leaves them speechless."

"He asks but gets no answers: we have lost one third of our national income, how can we pay back the loans?" the official said. "Varoufakis's character assassination started two weeks ago, ‎as a way to get rid of him."

Some EU officials speak privately of a "Varoufakis problem", accusing him of showmanship, inconsistency and indiscretion that have destroyed mutual trust and alarmed investors.

"He's a nice guy but it's just not how things work," said a fellow euro zone finance minister, speaking on condition of anonymity. "With Varoufakis it's hard to keep things private."


One euro zone official singled out his attacks on Germany and other powerful partners. "Varoufakis has become a serious liability in the relations between the euro zone and Greece," said the official. "Attitudes toward a country are largely personalized, especially in a small and intimate environment as is the Eurogroup."

No one is yet calling for his head, but an EU official said European Commission President Jean-Claude Juncker told Tsipras last week that Varoufakis needed to tone down his rhetoric if there was to be a successful result.

Other euro zone aides say the problem lies with Syriza rather than Varoufakis, who is not a member of the party although he was elected on its list. They note Tsipras has been more outspoken in demanding reparations from Germany for the World War Two Nazi occupation, and has accused the leaders of Spain and Portugal of conspiring to bring his government down.

But finance ministers are supposed to be different - more circumspect, less polemical, reassuring markets rather than unsettling them, dealing in figures rather than slogans.

While Tsipras has publicly rebuked some of his ministers for talking too much, he went on a walkabout with Varoufakis in Athens on Sunday - two days after the Juncker meeting - as if to dispel any talk of the media star minister being out of favor.


Some Syriza colleagues had criticized Varoufakis's publicity seeking even before he was splashed in photos with his sculptress wife on the roof terrace of their Athens apartment in the French news magazine Paris-Match last weekend.

"Kind request: fewer interviews and more work. The times require seriousness, solutions and measurable results," Syriza European parliamentarian Dimitris Papadimoulis said in a veiled swipe.

When a German television station aired video on Sunday of Varoufakis, in a 2013 lecture, flashing a middle-finger when speaking of Germany, the minister first said it was a fake, then posted a link on his Twitter feed to a film that clearly shows him making the gesture.

Despite the sniping, Varoufakis's position looks secure before an EU summit this week and a crucial Tsipras visit to German Chancellor Angela Merkel next Monday.

When Varoufakis first appeared in February at the Eurogroup that steers the 19-nation currency area, his shaven-headed muscular looks, open-neck shirts and plain speaking won him fans at home and among the European left. Behind closed doors, he declined to engage in detailed, technical discussion, preferring sweeping declarations as if still campaigning.

Varoufakis rapidly upset his European peers with market-rattling pronouncements on Greece's solvency and a track record of committing in Brussels to repay debts in full, then saying the opposite back home.

His first meeting with Schaeuble epitomized this megaphone diplomacy. When his host said they had "agreed to disagree", Varoufakis said they had not even agreed to differ. He went on to say austerity policies made in Germany were driving Greece into the arms of neo-Nazis. Berlin officials were aghast.

Euro zone officials say animosity between the two is complicating all negotiations.

Having accused the European Central Bank of "asphyxiating" Greece by refusing to let Athens issue more short-term debt which only its own banks would buy, Varoufakis criticized the ECB's sovereign bond-buying scheme as fuelling an equity bubble.

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