Wednesday 22 November 2017

Papandreou changes Greek Cabinet amid growth slump

Greek Prime Minister George Papandreou reshuffled his Cabinet for the first time, naming a health chief and demoting an economic official. Finance Minister George Papaconstantinou retained his post.

Andreas Loverdos, who shepherded this year’s pension reform, was named head of the health ministry before a planned overhaul of the state health system, the government in Athens said today in a statement.

Michalis Chrisochoides, who headed the police ministry, will replace Louka Katseli atop a revamped economy and competitiveness ministry. Katseli will head a new employment and social-security ministry.

Papandreou’s reshuffle before November local elections seeks to address popular dissatisfaction as incomes dwindle and inflation accelerates.

The economy is set to shrink 4pc this year and the government is enacting a three-year deficit- cutting plan in return for a €110bn 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.”

Recession continues

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 40pc in the first seven months of the year and euro-region finance ministers are today expected to approve the EU’s share of a €9bn loan, the second installment from the rescue.

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 69pc 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.”

Default threat

The deficit reached almost 14pc 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.

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.

The risk premium investors demand to buy Greek 10-year bonds rather than the German equivalent has increased to 9.18 percentage points from as low as 4.3 percentage points on May 12 after a euro-region rescue blueprint was announced.

The yield on the 10-year bond was unchanged from yesterday at 11.47pc today. Greek stocks fell, with the Athens benchmark general index declining 0.8pc at 10:40am to 1,660.46 after a four-day streak of gains.

In other Cabinet appointments, Yiannis Diamantides 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 will be sworn in today. Papandreou, who won election October 4 last year, will preside over a meeting of his new Cabinet on September 10 in the northern city of Thessaloniki.


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