Tsipras Names Cabinet Heading for Clash Over Bailout and Russia

Greece the Tipping Point of EU Opposition: Ian Bremmer

Greek Prime Minister Alexis Tsipras unveiled a cabinet that threatens to maximize friction with other European Union governments on issues ranging from the country’s bailout agreement to sanctions on Russia.

Yanis Varoufakis, a 53-year-old economics professor, will handle negotiations with the euro region and International Monetary Fund over the country’s 240 billion-euro ($273 billion) bailout, after being appointed finance minister. He has called it a “trap” that was destructive for Greece.

Foreign Minister Nikos Kotzias is due in Brussels on Thursday to discuss possible additional sanctions on Russia over the conflict in Ukraine. Before the cabinet even meets for the first time tomorrow, the Greek government said that it disagreed with an EU statement in which President Donald Tusk raised the prospect of “further restrictive measures” on Russia.

In recent months, Kotzias wrote on Twitter that sanctions against Russia weren’t in Greece’s interests. He said in a blog that a new foreign policy for Greece should be focused on stopping the ongoing transformation of the EU “into an idiosyncratic empire, under the rule of Germany.”

After his victory in Sunday’s election, among the first foreign envoys Tsipras planned to meet with was Russia’s ambassador to Greece.

Defense Ministry

While Greek voters swept Tsipras to power in snap elections on Jan. 25 after he campaigned on a platform of rolling back spending cuts and writing down debt, his appointments have raised questions about the approach to other issues.

His Coalition of the Radical Left, or Syriza, was two seats short of a majority and he formed a coalition with Panos Kammenos’s Independent Greeks, a religiously-inclined conservative party that also opposes austerity. Kammenos took the post of defense minister.

“It’s a problem the smaller party got defense, because this is a nationalistic party,” said Dimitris Sotiropoulos, an associate professor of political science at the University of Athens. “There could be a divergence of policies between the foreign and defense ministries.”

When it comes to finance, chiefs from the 19-nation euro area hardened their stance over Greece on Tuesday, with German Finance Minister Wolfgang Schaeuble saying that “the question of debt forgiveness doesn’t arise.”

The appointment of Varoufakis, a fierce critic of the euro region’s approach to the Greek economic crisis who has said Greece is insolvent and should default, puts the two sides on a potential collision course.

Markets Decline

The yield on Greek three-year bonds rose 197 basis points to 14.01 percent as of 4 p.m. in Athens today, while 10-year bond yields rose 38 basis points to 9.48 percent. The Athens Stock Exchange index fell 4.8 percent.

Further complications might arise with the redrawing of responsibilities among many ministries, which won’t now have unified bureaucracies, said Sotiropoulos.

Greece’s new cabinet will convene tomorrow for the first time. It also includes: Giannis Panousis as citizen’s protection minister, Georgios Stathakis at the new Economy, Infrastructure, Shipping and Tourism Ministry and Panagiotis Lafazanis at the new Production Overhaul, Energy and Environment Ministry.

Giannis Dragasakis, a Syriza veteran who was a minister in the five-month Xenophon Zolotas government of 1989 to 1990, becomes Tsipras’s deputy.