Seleccion eE

Greek reshuffle, Berlin-Paris deal ease euro fears

Greece's embattled prime minister sacrificed his finance minister on Friday to force through an unpopular austerity plan and avert bankruptcy, while EU powers Germany and France promised to go on funding Athens. After a week of political turmoil and violent protests in Athens, Prime Minister George Papandreou put his main socialist rival into the finance ministry in a bid to unite his fractious party behind spending cuts, tax rises and privatizations crucial to securing further IMF/EU assistance.

In Berlin, the leaders of Germany and France, long at odds over how to involve private holders of Greek bonds in a new rescue package for Athens, said they agreed on a mild solution favored by Paris and the European Central Bank.

The outline agreement between Chancellor Angela Merkel and President Nicolas Sarkozy on a second bailout package boosted the euro and reduced risk premiums on Greek and other peripheral euro zone bonds after a week-long financial rout.

"France and Germany want a new program in place as soon as possible. There is no time to lose," Sarkozy told a joint news conference with Merkel.

New Finance Minister Evangelos Venizelos, promoted from the defense ministry with the extra status of deputy prime minister, said in his first statement to reporters: "The country must be saved and will be saved."

Venizelos later said he would go to Brussels on Sunday to try to agree changes to the plan already approved by the ruling party in parliamentary committee.

"All the changes, as marginal as they may be, to the mid-term plan and the implementation law, serve social justice," Venizelos told Mega TV.

"Our fiscal targets can afterwards be served by other means if these means are accepted by our partners."

He gave no details, but his predecessor pledged this week to change the package to refrain from hiking heating fuel tax and raising the tax-free threshold for property.

Analysts said the socialist heavyweight was a second-best choice after Papandreou failed to persuade respected former ECB Vice-President Lucas Papademos to come aboard, but it enabled him to dump several ministers who had obstructed reforms.

Outgoing Finance Minister George Papaconstantinou, who negotiated a first 110 billion euro bailout for Athens last year and had the confidence of international lenders and markets, was moved to the environment ministry in a crisis-driven reshuffle.

"Venizelos is politically powerful and that might bode well for the implementation of fiscal consolidation, even though he has no track record in financial matters," UBS analyst Alexander Kyrtsis said.

Papandreou will seek a parliamentary vote of confidence in the new cabinet next Tuesday after a debate starting on Sunday.

Initial Greek market reaction was positive with bank shares rising by as much as 4 percent and the Athens stock market index climbing 2 percent.

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