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Greek Finance Minister Tests EU's Ways of Winning Friends

  • Reuters

Greek Finance Minister Yanis Varoufakis speaks during a Parliament session in Athens, Feb. 9, 2015.

Greek Finance Minister Yanis Varoufakis speaks during a Parliament session in Athens, Feb. 9, 2015.

Greece's new finance minister, Yanis Varoufakis, heads to a Eurogroup finance ministers meeting on Wednesday to ask for something almost no one there wants to give - at its most basic, a new debt agreement without the strings of austerity.

His officials say he expects a tough time. The question is whether he will come out like one of his predecessors, Evangelos Venizelos, having been humiliated.

Varoufakis is a charismatic type who is clearly enjoying a degree of European, if not global, celebrity. He has been dubbed “Superstar” by Greek media and even become something of a hearthrob in Germany's media.

But he has already upset some of the people he needs to convince, saying the eurozone was at risk of collapse, Italy's debt is unsustainable and bringing up Germany's Nazi past.

He will need his counterparts onside if he is to get first a bridge agreement to cover immediate financing and then a renewed debt plan.

“The best way to get a deal in the EU is by quietly building alliances behind closed doors and then trying to build consensus around compromises. Noisy confrontation usually leads to resistance and isolation,” a former diplomat in Brussels said.

Greek officials have made it clear that they have some “red lines,” namely a refusal to run large primary budget surpluses (the balance before interest payments on debt) and that the debt must be restructured.

The Greek approach to date has been to talk about negotiations but make strident and sometimes threatening demands, rationalized by Prime Minister Alexis Tsipras' anti-austerity sweep in popular elections.

Some of Varoufakis' performance may go further because of his economic expertise and practice in game theory.

But despite the media delight at his persona - leather jacket, rugged looks, bluntness - Varoufakis's attempts so far to get support in Europe have done little to improve Greece's position in what is as of now an 18-to-1 euro zone standoff.

Perhaps most damaging were comments on Italian television broadcast on Sunday. He said that the whole euro zone structure was teetering.

“The euro is fragile, it's like building a castle of cards, if you take out the Greek card the others will collapse,” he according to an Italian transcript.

This is a threat to his partners and the last thing a currency union struggling with economic malaise needs to hear.

He then went on to imply that other countries will be next if Greece is forced by the crisis to leave the euro zone, saying according to the transcript: “Let's face it, Italy's debt situation is unsustainable.”

Italian Economy Minister Pier Carlo Padoan, who will be at Wednesday's Eurogroup meeting to hear Varoufakis's requests, said the remarks were “out of place” and that a European solution to Greece's problems requires “mutual trust.”

Varoufakis later said that Padoan had telephoned him and that he had told the Italian he had been taken out of context and was referring to past experience from 2010-11.

Greek fire

In Brussels, officials who regard Varoufakis as a bit of a loose cannon console themselves with that fact he is not in charge.

“He'll only be implementing policy, not [be] the architect. Tsipras will give the signals,” said one EU official who has been watching Varoufakis closely.

But that may be wishful thinking. Tsipras himself gave an unbending speech at the weekend, announcing the end of austerity and adding an unexpected demand for German war reparations.

This comes on top of Varoufakis' comments at an uncomfortable news conference with Wolfgang Schaeuble, Germany's fiscally hard-line finance minister, that Germany should understand Greece because of its Nazi past.

“Nazism is rearing its ugly head in Greece,” he said, apparently referring to the far-right Greek political party Golden Dawn.

True perhaps, but not something that is usually said in diplomatic circles with Germans.

Defense Minister Panos Kammenos, meanwhile, has said that if Greece fails to get a new debt agreement with the euro zone, it could always look elsewhere for help - pointing to the United States, but also Russia and China.

This will also not have gone down well in Brussels. Seasoned EU figures still believe there is a deal to be done but if so Varoufakis is going to have adopt a very different tack behind closed doors to the one he has taken in public.

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