Greece's prime minister made a radical reshuffle of his government on Friday, appointing a party rival to run the economy in an effort to quell anger on the streets and dissent within his own party over austerity measures.
The reshuffle, two days after Athens erupted in violent protest, aimed to rally support for deeply unpopular policies now viewed as vital if Greece is not to default on its debt and plunge Europe into financial chaos. "We will prevail and we will hold on," said George Papandreou, ahead of announcing his new cabinet after night-long negotiations.
"We have as a country in the past successfully faced major crises. As hard as this struggle is, we cannot run away from our fight. We will fight and we will win, for Greece, its people and the future of the new generations," he said.
Evangelos Venizelos's surprise elevation to finance minister was interpreted as a last-ditch attempt by the prime minister to unite his increasingly fractious socialist party. The burly former defence minister had challenged Papandreou for the leadership of Pasok in 2007.
Papandreou had struggled to hold his government together as speculation of its default on Greece's debt to banks has mounted, with socialist MPs either defecting or openly doubting his ability to guide Greece through its worst crisis in modern times. The veteran socialist Vasso Papandreou, an economist and former minister, lashed out at the prime minister (they are not related). She said that, after 20 months in office and unprecedented cuts in pay and pensions, Pasok had "managed to mobilise nearly all of Greece's society against us".
On Wednesday, as riot police fought protesters outside parliament, Papandreou added to the sense of crisis by saying he would to step down to make way for a unity government, if only it would back further spending cuts; the offer was considered and rejected.
The package will cut €28bn from the budget over the next four years, and is seen as essential if the near-bankrupt state is to be given a second bailout by fellow euro zone members and the IMF, barely a year after it was bailed out with €110bn.Papandreou has described the measures as "life or death". They include a sale of state assets, property and utilities, which it is hoped will raise €50bn.
The 300 MPs began debating the cuts this week before it had become clear that the government would be unable to get a majority for its authorisation bill. The reshuffled government, which also saw the sacking of the labour and environment ministers, who had both openly criticised policies mandated by Greece's creditors, faces a vote of confidence on Sunday.
Analysts said that with Papandreou having regained the upper hand, it was certain the austerity measures would be passed. But it is far from clear how long the incoming government can survive.
"It won't solve the rot; the unions and vested interests that are at the core of the Greek disease," one aide to the prime minister said.
Saddled with a debt estimated at €355bn, or 150% of GDP, Greece faces the Herculean task of enforcing policies that are certain to face ferocious opposition.
"The tasks facing Greece are so huge that, from now, any government will be short-lived," said a political commentator, Pashkos Mandravelis. "This is an administration whose primary priority is passing these very unpopular austerity measures. After that, it is anyone's guess how long it will survive."
Man in the hot seat
Evangelos Venizelos is a 54-year-old professor in constitutional law with a strong grasp of economics. Despite Greece's acute dilemma, he made clear he wanted the job of finance minister.
His predecessor, Michalis Papakonstantinou, was a poor communicator. Venizelos, by contrast, is well connected to the media, and, as one of Greece's most articulate politicians, is viewed as the only man who can turn around public opinion. "If he can't do it, no one can," said Giorgos Kyrtsos, a commentator. "Few others can sell the measures that need to be sold as he can."
A prolific writer with an imposing presence, Venizelos has good ties to unions affiliated to the ruling Pasok party, whose support is vital if reform is to succeed. But Venizelos, married to the daughter of a wealthy entrepreneur, has not hidden his hope of being prime minister. It is a risk that Papandreou is willing to take, to save his government, and the country, from collapse.
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