Papandreou picked outgoing Defense Minister Evangelos Venizelos as new finance minister, jettisoning George Papaconstantinou, architect of a belt-tightening program that has stoked violent unrest and a revolt in his Socialist Party.
The move seemed likely to buy time politically for the embattled prime minister but did little to dilute skepticism that Greece would be able to implement a new round of deeply painful reforms.
The European Union and International Monetary Fund have made a new bailout for Greece, estimated at 120 billion euros, conditional on Papandreou’s five-year package of cuts and tax hikes worth 28 billion euros ($39.59 billion).
The political upheaval and three-weeks of protests have pounded markets and drawn criticism from other EU states, where policymakers have dithered over how best to keep funding Greece and forestall a disastrous “credit event.”
Papaconstantinou becomes environment minister in the reshuffle. The new Cabinet was sworn in by Orthodox priests in traditional robes on Friday and a confidence vote is due by Tuesday night.
Rather than giving new impetus to the reforms, analysts said, the reshuffle was aimed primarily at quelling dissent in the Socialist Party by moving the unpopular Papaconstantinou and appointing the prime minister’s main party rival Venizelos.
The prime minister also removed the labor and environment ministers who had resisted some of the economic reforms, among 15 ministers or deputy ministers who were dumped.
Papandreou originally wanted Lucas Papademos, an internationally respected former deputy head of the European Central Bank, as finance minister, analysts said. He would have impressed markets more, but he turned down the job.
Venizelos, a ruling PASOK party heavyweight, has held several cabinet posts in the past including those of government spokesman, justice minister and development minister.
In 2007, he challenged Papandreou for the party leadership.
The government aims to pass the austerity package — which also includes a plan to raise 50 billion euros by selling state assets — this month and must then begin work on a new set of laws to implement it.
The protests against the reforms, which include plans to raise 50 billion euros through privatizations, have combined with political infighting and euro zone indecision to spook international markets.
Analysts said even if the new government manages to win the confidence vote and pass the new reforms, the chances they would be able to effectively rein in a debt mountain of 340 billion euros — worth 150 percent of Greece’s annual output — were diminishing.
“If the political and social problems continue to deepen, then market pressures for a more immediate resolution to the crisis will build,” Capital Economics wrote in a note.
“And even if the pressures subside and some form of agreement can be reached next month, it seems very unlikely that this will amount to a decisive solution to Greece’s fundamental economic and fiscal problems.”
