Controversial dual Greek-Australian citizen Yanis Varoufakis has been removed from the frontline of the country’s battle with European creditors, leading to a bounce in European markets.

The negotiating reshuffle came in the middle of talks in Riga, Latvia between European and IMF leaders and Greece where Mr Varoufakis was unable to secure a win on debt negotiations, the ABC reports.

“The Eurogroup meeting in Riga showed Varoufakis was more or less isolated and it seems that (Greek Prime Minister Alexis) Tsipras has understood that,” Felix Herrmann, a market strategist at DZ Bank, told The Guardian.

“The market is a bit relieved…(that) his influence has decreased.”

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A source in Athens has given form to the rumours he was sacked as finance minister, implying they were not true. “To make him resign would be to retreat and the government would never do that,” The Guardian reported a government source saying.

Mr Varoufakis spent more than a decade in Australia where he taught at the University of Sydney’s economics department until 2000.

He maintains close ties to the city where his daughter Xenia lives, the ABC has reported.

He was touted as Greece’s great hope to elevate the debt-stricken country from its crisis with his libertarian Marxist economic strategy.

But it appears his philosophy has jarred with others around the negotiating table, leading to his demotion.

He has been appointed to supervise a new team negotiating a reform deal with lenders.

At Riga on Friday he was labelled a liability in the talks, critics said his style was “lecturing” and he failed to produce reforms lenders demanded, the ABC reported.

“After three months of attempting to reach a better deal for Greece and roll back austerity, Mr Varoufakis has only succeeded in frustrating creditors,” Jasper Lawler from CMC Markets told The Guardian.

It’s not the first time Mr Varoufakis has been undermined, in February Mr Tsipras sidelined him over unrealised results.

If you really think that in matters of substance it was down to one person you have barely scratched the surface #Greece

— Yiannis Mouzakis (@YiannisMouzakis) April 27, 2015

Stock Markets in Greece, Spain, Italy, France, Germany and the United Kingdom all jumped about 1.3 percent, with the highest percentage rise felt in Greece: 4.37 per cent after the news set in.