Greece's Socialists to form new government

ATHENS, Greece – Greece's Socialist prime minister-elect made final decisions Monday on his new Cabinet, whose main challenges will be to revive the faltering economy and improve environmental protection.

George Papandreou, 57, will announce his appointments after being formally sworn in Tuesday, party officials said. He won a crushing electoral victory over the weekend.

With the economy expected to contract in 2009 after years of growth, and a deficit likely to top 6 percent of GDP, Papandreou has pledged a stimulus package of up to euro3 billion $4.38 billion and says he will limit borrowing by reducing government waste and going after tax dodgers.

International ratings agency Standard & Poor's said Greece's credit rating could improve if the new government implements a "clear, credible and sustainable" strategy to address the country's debts. S&P added that the Socialists' clear victory could help them tame the debt burden.

And political analyst Anthony Livanios said Papandreou's economic policy could work.

"I do believe it's a credible plan that focuses on reinvigorating the small entrepreneur, on putting the tax system in better order ... and Papandreou plans to incorporate the best and the brightest of Greek society in his economic team," Livanios said.

The new Cabinet, which will be sworn in Wednesday, is expected to be considerably leaner than conservative Costas Karamanlis' outgoing one. But the Socialists have pledged to create a separate environmental portfolio — an issue particularly resonant in a country that has suffered a series of devastating forest fires over the past three summers.

Papandreou, who was formally invited Monday to become the new prime minister, has warned Greeks they face tough times.

"Nothing is going to be easy," he said late Sunday. "It will take a lot of hard work ... And we don't have a day to lose."

Papandreou, a former foreign minister whose father and grandfather were both prime ministers, led his Panhellenic Socialist Movement, or PASOK, to victory over Karamanlis' conservatives, who had been in government since 2004.

The campaign was fought almost exclusively on economic issues. But the conservatives already had been badly damaged by a string of economic scandals that soured many voters and contributed to the party's worst electoral showing ever on Sunday.

Near-final results, with 99.83 percent of votes counted, showed Papandreou's party with 43.92 percent support. Karamanlis' New Democracy took 33.48 percent.

Karamanlis, 53, who five years ago became the youngest prime minister in modern Greek history, resigned as leader of the party founded 35 years ago by his late uncle and former prime minister, Constantine Karamanlis.

The results gave PASOK a solid parliamentary majority, with 160 of Parliament's 300 seats. New Democracy will hold 91 seats, and the communist KKE party, in third with 7.54 percent of the vote, has 21 seats. The nationalist LAOS party has 15 seats, with 5.63 percent of the vote, and another left-wing party, SYRIZA, won 13 seats with 4.59 percent.

Papandreou's victory Sunday, along with a recent win by socialists in Portugal, bucks a trend in which conservatives have surged in Europe's powerhouse economies.

AFP/Armend Nimani