Greek PM axes finance chief in reshuffle

GREEK Prime Minister George Papandreou appointed a new finance minister in a crisis reshuffle to try to push through harsh economic reforms and avoid a default that could cause global economic turmoil.

Papandreou picked out-going defence minister Evangelos Venizelos as new finance minister, jettisoning George Papaconstantinou, architect of a belt-tightening programme that has stoked violent unrest and a revolt in his Socialist Party.

The move seemed likely to buy time politically for the embattled prime minister, but did little to dilute scepticism that Greece would be able to implement a new round of deeply painful reforms.

The European Union and International Monetary Fund have agreed a new bailout for Greece, estimated at €120 billion, conditional on Papandreou’s five-year package of cuts and tax hikes worth €28bn.

The political upheaval and three weeks of protests have pounded markets and drawn criticism from other EU states.

Papaconstantinou moves to environment minister in the reshuffle. The new cabinet was sworn in by Orthodox priests in traditional robes and a confidence vote is due by Tuesday night.

Rather than giving new impetus to the reforms, analysts said, the reshuffle was aimed at quelling dissent in the Socialist Party by moving the unpopular Papaconstantinou and appointing the prime minister’s main party rival Venizelos.

Fifteen ministers and deputy ministers were removed in the reshuffle, including the labour and environment ministers, who had resisted some of the economic reforms.

Greek bank stocks surged after the cabinet deal, which is likely to restore political stability in the short-term and ensure a successful confidence vote.

Venizelos is close to a party group unhappy with austerity plans, as is new deputy finance minister Pantelis Oikonomou.

By bringing critics into the government, Papandreou may, at least for now, have stopped a party revolt that led three Socialist deputies to resign this week.

Oikonomou, previously an outspoken critic of the bailout, said after the reshuffle that the government must succeed.

Papandreou originally wanted Lucas Papademos, an internationally respected former deputy head of the European Central Bank, as finance minister. He would have impressed markets more, but he turned down the job.

Venizelos has held several cabinet posts in the past and, in 2007, challenged Papandreou for the party leadership.

The government aims to pass the austerity package — which also includes a plan to raise €50bn by selling state assets — this month and must then begin work on a new set of laws to implement it.

Former finance minister Stefanos Manos said: “This buys Papandreou just a little time. By putting Oikonomou and Venizelos in government he makes sure that the mid-term budget plan will pass. But this just delays his problems... Those who are called to implement the mid-term budget plan believe less in it than Papaconstantinou.”

Eurasia Group European director Wolfango Piccoli predicted elections within months, saying Papandreou had been “severely, possibly permanently, damaged” by the battle over reforms.

Other analysts said the risk of a Greek default was increasing, despite the disastrous potential consequences.

Picture: Greek Prime Minister George Papandreou, centre, flanked by newly-appointed Foreign Minister Stavros Lambrinidis, left, and Environment and Energy minister George Papaconstantinou.