Papandreou Changes Greek Cabinet Amid Growth Slump
Economy and Competitiveness Minister Michalis Chrisochoides
Kostas Tsironis/Bloomberg
Greece's new economy and competitiveness minister Michalis Chrisochoides.
Greece's new economy and competitiveness minister Michalis Chrisochoides. Photographer: Kostas Tsironis/Bloomberg
Greece's labour and social security minister Louka Katseli
Kostas Tsironis/Bloomberg
Greece's new labour and social security minister Louka Katseli.
Greece's new labour and social security minister Louka Katseli. Photographer: Kostas Tsironis/Bloomberg
Greek Prime Minister George Papandreou
Andrew Harrer/Bloomberg
Greek Prime Minister George Papandreou's reshuffle before November local elections seeks to address popular dissatisfaction as incomes dwindle and inflation accelerates.
Greek Prime Minister George Papandreou's reshuffle before November local elections seeks to address popular dissatisfaction as incomes dwindle and inflation accelerates. Photographer: Andrew Harrer/Bloomberg
Greek Prime Minister George Papandreou reshuffled his Cabinet for the first time in his 11- month-old administration, as government bonds weakened and the inflation rate held at its fastest since the euro was adopted.
Finance Minister George Papaconstantinou retained his post as Andreas Loverdos, 54, who shepherded this year’s pension reform, was named head of the health ministry before a planned medical-system overhaul, the government in Athens said today in a statement. Michalis Chrisochoides, 54, who headed the police ministry, will replace Louka Katseli atop a revamped economy and competitiveness ministry. Katseli, 58, will head a new employment and social-security ministry.
Papandreou’s moves before November local elections sought to address voter dissatisfaction with rising prices and the second year of recession. The economy is set to shrink 4 percent this year and the government is enacting a three-year deficit- cutting plan in return for a 110 billion-euro ($126 billion) bailout from the European Union and International Monetary Fund.
“The key ministries that appear to have been affected are those related to economic growth,” Giada Giani, an economist at Citigroup Global Markets in London, said in a telephone interview. “The government is signaling that it’s done the hard job in fiscal consolidation and will keep doing that but that it also needs to focus now on boosting growth.”
The extra yield investors demand to hold Greek 10-year government bonds rather than benchmark bunds reached the highest level in four months. The Greek-German 10-year yield spread reached 942 basis points and was at 940 basis points as of 1:55 p.m. in Athens, from 914 basis points yesterday.
Default Risk
Greece still faces a “substantial” default risk as insolvency prevents the nation from repaying its debt when its bailout program expires in three years, Pacific Investment Management Co. fund manager Andrew Bosomworth said yesterday.
Greek stocks fell, with the Athens benchmark general index declining 1.8 percent to 1,644.05 after a four-day streak of gains.
The Greek economy shrank for a seventh quarter in the three months to June as wage and pension cuts and tax increases damped spending. The central government deficit narrowed 40 percent in the first seven months of the year and euro-region finance ministers are today expected to approve the EU’s share of a 9 billion-euro loan, the second installment from the rescue.
Tax increases on fuel, alcohol and tobacco have boosted the inflation rate to a 13-year high. The August rate held at 5.5 percent, the same rate as July and the most since Greece adopted the euro in 2001, the Athens-based Hellenic Statistical Authority said today in an e-mailed statement.
Opinion Polls
Greeks believe the government’s efficiency is deteriorating and the country’s situation is likely to worsen, two polls showed on the eve of Papandreou’s Cabinet revamp. Seventy-six percent of respondents in a poll conducted by MRB Hellas SA said the nation’s economy won’t improve and 69 percent said government policies aren’t laying the ground for growth.
“Some members of the government are paying for the government maintaining the same policies,” opposition spokesman Panos Panagiotopoulos said in an e-mailed statement. “However, Greece and the Greeks will continue to pay for these policies.”
The deficit reached 13.6 percent of economic output last year, the second highest in the EU, and Papandreou has argued the austerity measures are needed to prevent the country from defaulting on its debt after borrowing costs soared.
In other Cabinet appointments, Yiannis Diamantides, 61, will head a new ministry for maritime, fishing and island affairs, satisfying a key demand of Greek ship owners. Costas Skandalidis was appointed agriculture minister, replacing Katerina Batzeli. Haris Pamboukis was named minister in charge of investment, while Papandreou relinquished his post of foreign minister to his deputy, Dimitris Droutsas.
Ministers were sworn in today. Papandreou, 58, who won election Oct. 4 last year, will preside over a meeting of his new Cabinet on Sept. 10 in the northern city of Thessaloniki.
To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net.
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