Under the changes announced at 1:40 a.m. (2240GMT Monday), George Papaconstantinou remains finance minister, but the ministers of development, labor and health have been replaced. Greece’s governing Socialists face regional elections in November, testing tolerance for harsh austerity measures required to receive up to ¤110 billion ($140 billion) in international bailout loans over three years.Ministries related to the economy or facing major reforms are subjected to frequent inspections by budget enforcers from the European Union and International Monetary Fund.
Prime Minister George Papandreou, elected last October as the country descended into financial crisis, also created an investment ministry to be headed by a close aide, and switched several junior portfolios between ministries. The changes were seen as boosting the role of finance ministry’s control over economic reforms.
Greece has promised to reduce its budget deficit from 13.6 percent of gross domestic product in 2009 to 8.1 percent this year. So far, the Finance Ministry says it is slightly ahead of its targets. Also on Tuesday, party veteran Michalis Chrysohoidis was named as the new development minister, replacing Louka Katseli, who moves to the labor portfolio.
Several other veteran party members who served in previous Socialist governments returned to the Cabinet in an apparent effort to woo traditional supporters who are less likely to back the economic austerity. Papandreou’s Socialists, still comfortably ahead of conservatives in surveys but losing overall support, slashed government payrolls and overhauled the pension system earlier this year. But they still face more difficult reforms, including dealing with loss-making state enterprises and abolishing labor protection rules to try and boost competitiveness.
Papandreou himself gave up the foreign ministry portfolio, promoting his deputy to minister.
The new government was sworn in later Tuesday, before Papandreou gives an annual speech on the state of the Greek economy at the weekend.
