- Associated Press - Friday, November 11, 2011

ATHENS, Greece (AP) — Greece’s new interim Cabinet was sworn in Friday, with former European Central Bank Vice President Lucas Papademos at its helm as prime minister and the key position of finance minister unchanged.

Papademos was appointed on Thursday to head the temporary coalition government, which includes ministers from Greece’s two largest parties and a smaller right-wing party, after a two-week political crisis that endangered the country’s continued bailout funding and raised questions about its position within the eurozone.

The new government of Papademos, who also spent time as Greece’s central bank governor, must now implement the terms of Greece’s latest debt deal — a €130 billion ($177 billion) agreement reached by the European Union on Oct. 27. It includes provisions for private bondholders to forgive 50 percent — or some €100 billion — of their Greek debt holdings.

He must also secure the next €8 billion installment of the country’s initial €110 billion eurozone and International Monetary Fund bailout, without which Greece will default in a matter of weeks. Once that is done and the country has implemented the new debt agreement, Papademos is to lead the country to early elections, tentatively scheduled for February.

The new government will face a confidence vote in Parliament in the coming days — a vote it is almost certain to win as it enjoys the support of both major parties — the socialists headed by George Papandreou, who led the country through the past two years of financial crisis, and the conservatives of Antonis Samaras.

Papademos’ tenure is expected to last only for a few months, but he will face the challenge of steering the country through the implementation of austerity measures already passed, including the suspension of 30,000 civil servants on partial pay and a series of privatizations.

The new prime minister will also have to negotiate the details of the private bondholder writedown included in the latest European debt deal.

Angered by nearly two years of austerity, including cuts to salaries and pensions and repeated tax hikes that have led to a deep recession, Greeks have organized frequent strikes and demonstrations that often turn violent. Papademos’ appointment may dampen the protests, at least at first, some analysts argue.

“I think he will get that kind of brief honeymoon,” said Thanos Dokos, head of the Hellenic Foundation for European and Foreign Policy. “People were desperate enough and now (may) give a new face, a new person, who’s not a professional politician some leeway to try to do his job in the proper way. And, of course, at some point they will be expecting some results, which I’m afraid will not be forthcoming in the short term.”

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