Greek Government Appoints New Finance Minister in Cabinet Reshuffle

By Nektaria Stamouli 

ATHENS--Greece's coalition government announced a sweeping cabinet reshuffle Monday in an attempt boost its popularity after losing ground in last month's European Parliament elections.

Among the changes, economist Gikas Hardouvelis was appointed finance minister, replacing Yannis Stournaras, who is expected to take the helm at Greece's central bank when the term of the current governor expires later this month.

Mr. Hardouvelis, 59, is currently a professor of economics at the University of Piraeus and chief economist at Greek lender Eurobank Ergasias SA. An experienced technocrat with a long background in government, the appointment of Mr. Hardouvelis is seen as signaling a continuation in Greece's ongoing reform efforts.

Most recently, he served as a senior adviser in the interim government of former Prime Minister Lucas Papademos and was instrumental in helping negotiate Greece's private-sector debt restructuring in 2012. Mr. Hardouvelis also served as an economic adviser to former Prime Minister Costas Simitis between 2000 and 2004.

Mr. Hardouvelis will be tasked with pushing through a number of difficult overhauls in the months ahead, as well as nursing Greece's recession-ravaged economy back to growth after six years of recession. In a reprise of his previous role, he will also negotiate further debt relief for the country later this year with Greece's official creditors-- the European Union, the International Monetary Fund and the European Central Bank.

His first test will come in the next few weeks when a delegation of international inspectors from the EU, the IMF and the ECB--commonly known as the troika--is expected to return to Athens to assess whether the country's reform program is on track.

But Greece finds itself in much better shape than when Mr. Hardouvelis was last in government. Since then, his predecessor, Mr. Stournaras, has pushed through many of the difficult reforms demanded by creditors. He has also produced Greece's first primary budget surplus--excluding debt payments--in a decade and issued the country's first long-term bond this year after a four- year hiatus from international debt markets.

The cabinet reshuffle follows dual local and European Parliament elections two weeks ago, which were widely seen as a test of confidence in Greece's current two-party government.

Voters in the European Parliament elections handed the leftist, opposition Syriza party its first electoral victory in its history. It came in first with 26.7% of the vote, some four percentage points ahead of the conservative New Democracy party that dominates the coalition government.

But a better-than-expected showing in both elections by the junior partner in the coalition, the socialist Pasok party, prevented Syriza's showing from to delivering a crippling blow to the coalition, as most voters appeared to eschew the leftist party's calls for fresh national elections.

As a result of the outcome in the country's dual votes, Pasok will strengthen its role in the current government, adding to the number of seats it holds in the cabinet.

Among the more significant additions was the return of former Pasok, and now independent, lawmaker Andreas Loverdos back to the government fold, and boosting the coalition's overall majority in Parliament to 154 seats in the 300 seat chamber. Mr. Loverdos, who previously served as both minister of labor and minister of health, will be education minister in the new cabinet.

The new government will be sworn in Tuesday afternoon followed by the first meeting of the new cabinet.

Since entering recession in 2008, Greece's economy has shrunk by more than a quarter--in part due to tough austerity measures that the country's creditors have demanded in exchange for international loans. The downturn, combined with the measures, has left more than a quarter of the workforce unemployed and pushed tens of thousands of businesses into bankruptcy.

Such harsh conditions have fueled the rise of Syriza and stoked public anger against the two governing parties that have dominated Greece's political landscape for the past four decades. In addition, the crisis has also seen the emergence of a variety of smaller and newer parties, ranging from the far-right Golden Dawn party to the three-month-old, center-left To Potami party.