Greek Prime Minister to reshuffle cabinet

Greece's Prime Minister, struggling to ensure Parliamentary approval for a crucial austerity bill, said Wednesday he would reshuffle his Cabinet and seek a vote of confidence for his new government this week, after coalition talks with opposition parties failed.

George Papandreou has been struggling to contain an internal party revolt over the new austerity package that is the main condition for continued funding from an international bailout and avoiding a devastating default that would knock the global economy and undermine the future of the eurozone.
Mr. Papandreou's announcement came after hours of negotiations on a day when central Athens was rocked once more by anti-austerity riots and the debt-ridden country came under massive pressure from markets.

Wednesday's political maneuvering and violence on the streets of the Greek capital triggered a selloff in global financial markets as investors worried that a default in Greece could hurt banks in other countries in a chain reaction experts predicted would be catastrophic. Yields on the country's 10-year bonds reached new record highs, spiraling to 18.4 percent.

“Tomorrow I will form a new government and immediately afterwards I will ask for a vote of confidence from Parliament,” the Prime Minister said, adding that “The country is facing critical times.”

Mr. Papandreou and conservative party leader Antonis Samaras held their telephone negotiations Wednesday afternoon. The conservatives' conditions for participating in a potential grand coalition were that Mr. Papandreou leave his current position as Prime Minister, and the new government renegotiate the bailout agreement, an opposition party official said. The official spoke on condition of anonymity to discuss details of the negotiations.

Other opposition party officials publicly called for Mr. Papandreou's resignation.

Wednesday's talks “reached the point that there should be a government of national unity and that Mr. Papandreou should not remain Prime Minister, because he symbolizes the failure of the last 18 months,” senior conservative party official Panos Panagiotopoulos said on Mega TV.

Mr. Papandreou said that while he “clarified that my responsibility has no dependence on official posts,” such conditions were unacceptable.

“Before the meaningful issues were negotiated, conditions were made public that could not be accepted,” he said, adding that they would have kept “the country in a lingering state of instability and introversion, while the vital national issue remains dealing with the national debt.”

The emergency talks began as riot police clashed with thousands of youths in the main square outside Parliament. Police fired repeated volleys of tear gas to repel rioters hurling firebombs and ripped-up paving stones. A crowd of youths smashed the windows of a luxury hotel in the square. More than 60 people were injured, including 36 police.

The new austerity package, which runs two years beyond the current government's mandate to 2015, has sparked widespread protests and a revolt from within Mr. Papandreou's Socialist party. He saw his majority in the 300-seat Parliament reduced to five on Tuesday after one of his deputies rebelled and declared himself an independent. Another deputy has said he will not vote for the austerity package.

But the measures must be passed by Parliament before the end of the month if debt-ridden Greece is to continue receiving funding from its international bailout.