Anti-austerity riots rocked Athens on Wednesday Greece set to unveil new cabinet
Anti-austerity riots rocked Athens on Wednesday Greek Prime Minister George Papandreou is set to announce a new cabinet in a concessionary move as he seeks support for new austerity measures.
Mr Papandreou, who will stay in his post, says he will put the new government to a vote of confidence in the parliament.
Renewed fears that Greece will default on its debt have shaken markets.
The proposed measures are necessary to gain EU and IMF aid, but have been met with fierce opposition in Greece.
Athens witnessed some of the most violent protests in more than a year on Wednesday as demonstrators went on to the streets and took part in a general strike.
Mr Papandreou had also faced the threat of a revolt in his socialist Pasok party over the controversial package.
Mr Papandreou, who came to power in 2009, has not indicated the extent of his ministerial shuffle, but correspondents say it may include the replacement of Finance Minister George Papaconstantinou.
The BBC’s Malcolm Brabant in Athens says economic analysts say the post is likely to be filled by Lucas Papademos, a former vice president of the European Central Bank.
This would be met with approval from the IMF and EU, but whether it will satisfy members of parliament remains unclear, our correspondent says.
The government is seeking approval for a package of 28bn euros (£24.6bn; $40.5bn) of cuts, due to take effect from 2012 to 2015.
George Papandreou: “This is a time of duty”
The policies are required for the release of the next tranche of aid – 12bn euros – from the EU and IMF.
In an address on Wednesday, Mr Papandreou announced he would “continue on the same course”.
“This is the road of duty, together with Pasok’s parliamentary group, its members, and the Greek people.
“Tomorrow I will form a new government, and then I will ask for a vote of confidence,” he said.
During talks, Mr Papandreou was said to have offered to step down to clinch a coalition, but later agreed to carry on.
Greek bail-out timelineMay 2010: EU and IMF agree bail-out package to prevent Greece defaulting on its debts; in return, Greece agrees to make 30bn euros of budget cuts over the next three yearsFebruary 2011: EU and IMF experts tell Greece it must make further cuts to keep its recovery on trackApril 2011: EU figures reveal Greek deficit revised up to 10.5%, worse than previously thoughtMay 2011: Greece begins privatisation programme but is warned the IMF may not release more funds because Athens cannot guarantee it will remain solvent for the next 12 months29 June 2011: Deadline for Greece to agree new austerity package
EU commissioners are said to have a “profound sense of foreboding” about Greece and the future of the eurozone, according to leaked account of a meeting on Wednesday seen by the BBC.
Greece became the world’s least credit-worthy nation after Standard & Poor’s ratings agency downgraded it earlier this week.
On Wednesday, tens of thousands of activists and unionists gathered in Syntagma square in Athens, near parliament.
A further 20,000 people also demonstrated in Thessaloniki, police said.
The general strike was the third in Greece this year.
The events destabilised markets, with major indexes witnessing the biggest drop on Wednesday since 1 June, and the euro sliding more than 1% against the dollar.
Yields on Greece’s 10-year bonds reached a record high of 18.4%.
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