Yanis Varoufakis gets official backing but Greek bailout deal proves elusive

Greece's government yesterday said it backed finance minister Yanis Varoufakis and remained intent on securing extra bailout funding.

 

However, comments from officials suggested talks with creditors may continue to stall ahead of two payments to the International Monetary Fund (IMF) – one tomorrow and another on 12 May totalling almost €1bn (£0.7bn).

 

“The head of the negotiating team is Mr. Varoufakis, who has the full confidence of the government,” said government spokesperson Gabriel Sakellaridis.

 

Varoufakis will attend the next meeting of finance ministers on 11 May in Brussels. A spokesperson for the finance ministry told City A.M. he will be accompanied by Euclid Tsakolotos or George Chouliarakis – two officials who have been given more prominent roles in negotiations – but that this had been the case at most meetings already. Talks between Greece and its creditors have stalled as the country refuses to give in on reforms it called its “red lines”.

 

“We believe our red lines are for the benefit of the economy and society,” Sakellaridis said.

 

He added that Greece would aim for a deal to be wrapped up this month. “The Greek government is not waiting until the end of May for a liquidity injection. It expects this liquidity to be offered to the Greek economy as soon as possible.”

 

But comments from Greek officials have cast doubt on the progress of negotiations. Greek Labour Minister Panos Skourletis yesterday hit out at the IMF for its demands. 

 

“They (IMF) are asking us to not touch anything (from the austerity measures) that have ruined Greek people’s lives in the last five years,” he told Greece’s Mega TV.

 

He added: “We will not implement any measures which would lead to pension cuts this year.”

 

From day one of negotiations with the  country’s creditors, the new Greek government has been adamant that it would not give in on certain “red lines”. 

 

One of those has been pensions. Creditors have pushed for Greece to cut pensions, but the country claims that they are already at low levels. According to the Organisation for Economic Cooperation and Development (OECD), a Paris-based think tank, Greece spends the second-highest proportion of total public spending on pensions. 

 

However, that figure is boosted by the fact Greece has made drastic cuts in total spending since 2010. Another no-go area for Greece is its labour market, which creditors insist it liberalise. While specifics have not been made public, it is believed Greece is being pushed to reverse plans to raise its minimum wage. Other areas the government will not give in on is its primary surplus – the difference between tax revenue and spending excluding debt interest – which it wants to cut from 4.5 per cent of GDP. The country is almost unanimous in attributing blame for its economic demise on its austerity-imposing bailout programme.

 

Consistent with its anti-austerity agenda, the Syriza government does not want to increase VAT for Greek islands which pay a lower rate. It is also refusing to fully privatise public companies such as ports, both for ideological  and practical reasons – a good slice of the party are Marxists and they also expect to get a better price for public companies when the economy has recovered. However, it has now agreed to part-privatise some companies.