Greek cabinet reshuffled amid debt crisis

Venizelos, at right, replaces Papaconstantinou as finance minister at a time of crippling debt problems [AFP]

The Greek prime minister has replaced his finance minister as part of a broad cabinet reshuffle – an example of reforms aimed at tiding over the country’s crippling debt crisis despite popular resentment.

George Papandreou’s move came two days after protesters angry with harsh austerity measures clashed with riot police in the capital, Athens.

George Papaconstantinou, the finance minister, will move to the environment and energy ministry. He will be replaced by Evangelos Venizelos, a government spokesman said on Friday.

Venizelos, an influential Socialist politician, had challenged Papandreou for the party leadership four years ago.

Government portfolios were also redistributed to address demands for faster reform from Greece’s debt monitors at the European Union and International Monetary Fund.

A new ministry for administrative reform was created to help scale back the country’s public sector.

Dimitris Droutsas, a close friend of Papandreou, lost the foreign affairs portfolio to Stavros Lambrinidis,
who heads Greece’s Socialists in the European Parliament.

The new cabinet ministers were sworn in shortly after being named on Friday, and went into a meeting with Papandreou.

The prime minister had said he would also seek to build consensus among various political parties while sticking to the course of economic reforms.

“We have some tough negotiations ahead of us and the next few days will be crucial … These are critical moments for the country and we must have stability,” he told parliament on Thursday.

Show of unity

Against this backdrop of uncertainty, the leaders of Germany and France said they were united behind a new aid package for Greece.

Angela Merkel, the German chancellor, said the new package, which includes voluntary private sector participation, was a “good foundation” for a Greek deal.

“We have to move forward on this now and I think it makes sense to involve the private sector. This is important for us,” she said at a joint press conference with Nicolas Sarkozy in Berlin on Friday.

Germany had previously said it wanted to forces banks to contribute funds to the bailout for Greece.

Al Jazeera’s Nick Spicer reports from Berlin on Franco-German show of unity over a new aid package for Greece

Earlier in Greece, ruling party legislators held a caucus meeting of the parliamentary group to debate the government’s policies.   

“We are not governing the country the way we should … We are going from depth to depth, from dilemma to dilemma,” Nikos Salayannis, a ruling party deputy, said.

Two other Socialist deputies stepped down on Thursday in protest and will be replaced by other party members.

Greece has to pass a 2012-2015 austerity programme worth $40.5bn by June-end or face being cut off from rescue funding by European countries and the IMF.

The measures including a five-year campaign of tax hikes, spending cuts and sell-offs of state property.

With its credit rating deep in junk status, Greece is being kept afloat by the $159bn EU-IMF rescue loan programme and will need additional support to cover financing gaps next year.

To meet its commitments, Papandreou’s Socialists abandoned a pledge not to impose new taxes and drew up a four-year privatisation programme worth $72bn.

This has fuelled ongoing protests against austerity by public utility employees and other affected groups.

Markets plunge

Stock markets around the world fell significantly on Thursday amid fears over Greece’s escalating debt woes.

European shares fell sharply, with banking stocks under particular pressure, over fears of contagion.

Greece has warned it will be unable to pay next month’s bills without a $17bn loan instalment from the EU and the IMF, part of a broader $159bn bailout package agreed last year

The BBC reported that a leaked account of a meeting between EU commissioners on Wednesday suggested that the commissioners have a “profound sense of foreboding” about Greece and the future of the euro zone.

The account, written by an official who attended the meeting, said this was in reaction to the “damning failure” of euro zone ministers to agree a new bailout for Greece on Wednesday.

The author cautioned that the markets would now “smell blood”.

“Our response to the challenges we face is stability and to stay on our course of reforms,” he said in an address to parliament.