Evangelos Venizelos, the former defense minister, replaced Finance Minister George Papaconstantinou, who has been the highly visible face of the government’s austerity drive.
Mr. Venizelos, 54, said at an afternoon press conference that he was ready to undertake the “historic challenge” of helping Greece to overcome its debt crisis. “I am leaving defense to go where the real battle is,” he said. In a speech to his new cabinet, Mr. Papandreou tried to rein in dissent and make clear how much was at stake, warning that the country’s debt burden “threatens to destroy us and wreck the lives of millions of Greeks.”
“We have a lot of hard work to do as a government before we are assessed by citizens in elections in 2013,” he added, referring to the year that the Socialists’ four-year term is due to expire and thus a clear indication that he had decided against a snap election.
The government is under pressure to push through budget cuts and tax increases in order to secure the next installment of a $155 billion rescue package pledged by the European Union and the International Monetary Fund and to qualify for a second bailout believed to be necessary to keep the country solvent.
But critics said that the reshuffle was a cosmetic, not structural, change. Yanis Varoufakis, a political economist at the University of Athens, told Skai television that “not even God almighty” as finance minister could change the dire situation.
Greeks increasingly feel they are unfairly suffering for mistakes made by their leaders and banks and have staged labor strikes and three weeks of daily protests to express their outrage. This week, Mr. Papandreou has contended with two defections from within his own Socialist Party and growing dissent. After the reshuffle, a confidence vote in the new government was expected on Tuesday night.
Mr. Venizelos, a respected professor of constitutional law at Aristotle University of Thessaloniki, in northern Greece, now faces the task of pushing through the hugely unpopular austerity program. A rival of Mr. Papandreou, he has held other ministerial portfolios over the years including culture and development, and challenged Mr. Papandreou for the leadership of the Socialist Party, known as Pasok, in 2007. Though he lost the leadership race, Mr. Papandreou has continued to rely heavily on him.
The new cabinet was met with criticism from other political parties. The main conservative opposition, New Democracy, said the removal of Mr. Papaconstantinou as finance minister amounted to “an admission of the failure of the government’s economic policy.” A spokesman for New Democracy, Yiannis Michelakis, accused the government of “rustling up a new administration to enforce the same erroneous policies.” Syriza, a coalition of leftist parties, said nothing could prevent the collapse of Mr. Papandreou’s beleaguered administration, and the Communists described the new cabinet as “dangerous.”
Mr. Venizelos said the government would continue to work for consensus with the parties that have opposed its austerity program. “We are open to ideas and dialogue but will not diverge from our fiscal targets,” he said. “The country must be saved and will be saved but we must work together, all Greeks together,’ he said.
Speaking at the same press conference, Mr. Papaconstantinou said he was “extremely happy” to be handing over the task of reviving the economy to a colleague with “experience and dedication.” While he acknowledged making mistakes during his term as finance minister, Mr. Papaconstantinou said the government’s actions had helped to avert a worse fate.
“We had reached the brink of disaster, and we managed to keep the country on its feet, and put into motion a series of important economic reforms,” he said. As evidence, he cited a crackdown on tax evasion, which has seen limited success, as well as the launch of a drive to privatize state assets. Greece, he noted, managed to reduce its budget deficit last year by 5 percent of gross domestic product, an unprecedented achievement for a euro-zone country.
Elias Mossialos, a professor of health policy at the London School of Economics who was appointed as the new government spokesman, replacing George Petalotis, told Net television, a state channel, that the priority now was “to restore the stability of the Greek economy.” He also said that “negotiations were under way” with Greece’s creditors regarding the terms of the bailout, but did not state explicitly that the country would seek changes to the existing agreement.
The Finance Ministry was initially offered to Lucas Papademos, a Columbia-educated economist who served as vice president of the European Central Bank from 2002 to 2010, but he turned it down.
Mr. Venizelos will also become a second deputy prime minister. Mr. Papandreou already has another Socialist veteran, Theodoros Pangalos, 73, as his first deputy.
Mr. Papaconstantinou, 50, the chief architect of the Greek government’s austerity drive, was named environment minister, a clear demotion.
Other key moves include the ousting of Dimitris Droutsas, 43, as foreign minister. He was replaced by Stavros Lambrinidis, a Yale-educated lawyer. Mr. Droutsas is broadly regarded by observers as having fallen short of the demands of a difficult portfolio.
Another victim of the reshuffle was Labor Minister Louka Katseli, 59, one of the most controversial figures in Mr. Papandreou’s cabinet. The Princeton-educated economist had repeatedly clashed with Greece’s foreign creditors on several proposed economic reforms including amending labor contracts that protect the rights of workers in the private sector. She was replaced by her deputy, Yiannis Koutroumanis.
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