Eurozone officials seek to bypass Varoufakis to spur Greek talks

A fraught eurozone meeting in Riga at the weekend has left Yanis Varoufakis, the Greek finance minister, increasingly isolated both in Brussels and in Athens as officials seek to bypass him in an effort to jump-start bailout talks.

Greece's dire financial position is forcing eurozone authorities to look beyondMr Varoufakis to Alexis Tsipras, prime minister, much like in February when Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup, brokered an extension of the current bailout programme.

According to two eurozone officials, Mr Dijsselbloem phoned Mr Tsipras from Riga in an effort to mend fences after Friday's feisty eurogroup meeting, where Mr Varoufakis was rounded on by his eurozone colleagues.

In a sign that Mr Varoufakis's combative approach is prompting concern in Greece as well, a senior Athens official said the Riga meeting was likely to lead to him being sidelined as Mr Tsipras and his deputy Yannis Dragasakis take a more hands-on role.

Amid the acrimony, differences over a new list of reforms that is to be agreed by Athens were barely discussed at the meeting, putting off indefinitely a deal to unlock access to the funds left from Greece's €172bn bailout.

"All the ministers told [Mr Varoufakis]: this cannot go on," said Luis de Guindos, Spain's finance minister.

Mr Varoufakis shrugged off criticism from his eurozone colleagues, comparing his situation to that of US President Franklin D. Roosevelt as he pushed through the New Deal. "They are unanimous in their hatred for me and I welcome their hatred," he tweeted.

Some eurozone and Greek officials believe divisions between Mr Varoufakis and Mr Tsipras are deepening and that a concerted appeal to the prime minister could still produce a deal by late May, the time many feel an agreement has to be reached if any aid disbursement can be made before the current bailout expires at the end of June.

Although there are wide differences between Athens and eurozone creditors on matters of substance the current stand-off with Mr Varoufakis is mostly on matters of process, officials said.

Because of the new government's vow not to return to intrusive inspections by bailout monitors, formerly known as the "troika", Mr Varoufakis has refused to engage with mid-level negotiators on the ground in Athens and has insisted a political agreement be reached at high levels instead. Eurozone leaders have stymied the strategy, insisting a deal be struck on a new economic reform plan with monitors in Athens before any talks on releasing aid money can occur within the eurogroup.

"There is an element of cognitive dissonance here," said one official involved in the talks. "Varoufakis does not comprehend that at the political level one just does not negotiate every item. Other people do that."

A person close to the Greek government said Mr Varoufakis had become "a drag on the Syriza administration".

But he is unlikely to be dropped immediately by Mr Tsipras, the person said: "The time to shed this finance minister is when the interim deal with creditors has been reached and before negotiations start on a new bailout package."

The government is trying to find €1bn to pay pensions and subsidies this week, and will need additional cash to make payments of €880m due to the International Monetary Fund by mid-May of face a default.

Dimitris Mardas, deputy finance minister, has managed to raise an extra €450m from the cash reserves of state-controlled entities to pay public sector salaries for the second half of April, while suspending payments due to government suppliers and value-added tax returns to exporters.

So far, mayors across the country have refused to comply with a decree approved by parliament on Friday forcing local authorities to deposit their cash reserves immediately with the central bank, on grounds that if Greece defaults the funds will be permanently lost.

"We coped in February and March thanks to improved revenue inflows and payment delays," said Mr Dragasakis. "But this situation can't continue - it will trigger recession, and society can't handle more recession, more unemployment and more austerity."

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