Greek Prime Minister George Papandreou's cabinet reshuffle has probably paved the way for approval of a harsh austerity package but there are doubts over whether it will be implemented. Papandreou, his own political survival on the line, plumped for party insiders and rivals to neutralize opposition instead of tough policy cops, in a wholesale shake-up of his cabinet Friday. He replaced unpopular Finance Minister George Papaconstantinou, architect of the reform package, with powerful party insider Evangelos Venizelos, hitherto the defense minister. The reshuffle should appease discontent within his Socialist Party (PASOK), making it much more likely that he will win a confidence vote Tuesday. That will in turn enable the approval of a 28-billion-euro austerity package on top of cuts that have driven unemployment up to 16 percent and extended a recession into its third year. The package is essential in return for a new bailout from the European Union and International Monetary Fund. But although the new cabinet is expected to approve headline figures agreed with the EU and IMF, they may look for wiggle room when it comes to passing laws to meet those targets. Comments from both the prime minister and his new finance chief after the shakeup appeared to fuel that concern. Papandreou told the new cabinet they had the resolve to push through reforms and save the Greek economy. But he said the new team would try to focus more on supporting growth — a difficult prospect for a country trying to cut its budget deficit. Venizelos said he would go to Brussels Sunday to try to reach agreement on changes to the plan already approved in parliamentary committee. “Our fiscal targets can afterwards be served by other means if these means are accepted by our partners,” he told Mega TV. “All the changes, as marginal as they may be, to the mid-term plan and the implementation law, serve social justice.” Papandreou has also appointed Pantelis Oikonomou, an outspoken opponent of the bailout, as deputy finance minister. Oikonomou has said that Greece should not sell loss-making companies because no one would buy them, nor profitable ones because Greeks should not lose their dividends. “Those who are called to implement the mid-term budget plan believe in it less than Papaconstantinou,” said Stefanos Manos, a political commentator and former finance minister, reflecting cynicism about the new cabinet. Facing widespread public anger and daily demonstrations that turned violent on Wednesday, the new ministers may seek to shift some of the cost cuts or tax hikes away from previously agreed areas. Papaconstantinou had been praised by EU and IMF officials for his efforts to implement reforms but had already failed to meet a target for cutting the budget deficit from 15.4 percent of annual output in 2009 to 8 percent in 2010. Venizelos is Papandreou's main party rival and close to PASOK deputies who have criticised the package as too severe. Papandreou failed to convince his first choice, ex-European Central Bank Vice-President Lucas Papademos, an internationally respected figure who analysts say would probably have adhered strictly to the letter of the deal with the EU and IMF. Analysts said introducing a new economic team could also pose problem in talks with lenders, particularly since little is known about Venizelos's financial expertise or whether his main priority will be impressing a domestic audience or Brussels. “(EU) finance ministers have been talking for months and now, in a very crucial, delicate phase, they suddenly have to talk to somebody new,” said Kornelius Purps, a bond analyst at UniCredit. “It doesn't make it simpler to introduce a new partner about whom little is known.” Papandreou had previously shown signs of trying to win public support by softening his plans. Just before the reshuffle, and facing a growing backbench rebellion, Papaconstantinou agreed to refrain from raising the tax on heating fuel and to keep the tax-free threshold on property at 200,000 euros ($283,200), rather than 100,000, as the plan originally envisioned. Venizelos is likely to seek similar solutions. “Some of the measures that have already been announced might not be implemented,” said one Greek analyst who wished not to be named. “He can leave out of the austerity package a few social groups, or make the fiscal consolidation softer.” In a sign of deep market concern over Greece's will to repay its debt mountain, equivalent to 150 percent of the annual economic output, the cost of insuring its government debt against default hit yet another record high on Friday before falling back. Papandreou's decision to ditch 15 senior and deputy members of his cabinet at the height of negotiations with lenders has caused consternation among EU leaders. Papandreou's reshuffle has appeased his critics but could have opened the way for further clashes over policy now that his closest ally in pursuing EU- and IMF-mandated belt-tightening is no longer at his side.
