Greek PM reshuffle plan in doubt as deputies quit

A string of parliamentary resignations today threatened to thwart Greek Prime Minister George Papandreou's plan to reshuffle his cabinet and pass new austerity measures needed to save Greece from default.

The political turmoil raised uncertainty over the Socialist cabinet's five-year plan for tax hikes, spending cuts and state property selloffs demanded by its bailout lenders, spooking investors who fear the problems could infect global markets.

The reshuffle reflects the unpopularity of the austerity measures and follows the failure of talks over a unity government yesterday that drew disappointment from European Union officials who have appealed for Greece's political elite to unite behind the belt-tightening.

Analysts said it was increasingly unclear whether Papandreou would be able to form a new governing team and get the measures approved amid the political chaos, which follows nationwide strikes and violent protests in Athens yesterday.

"It will be very hard now to find good people to form a government now. They don't trust (Papandreou) after all the flip-flops he has made," said former finance minister Stefanos Manos. "Who will make privatizations now in all this turmoil?"

Two lawmakers in the ruling party stepped down on Thursday and will be replaced by other party members.

A ruling party deputy said that there was a lack of leadership in the country and that lawmakers were gathering signatures to force a caucus meeting of the parliamentary group later in the day.

"This does nothing to reduce fears that some form of default will eventually take place," Ben May of Capital Economics said after the resignations.

Papandreou may seek to replace his finance minister, George Papaconstantinou, the main architect of hugely unpopular budget cuts demanded by the EU and the IMF as part of Greece's 110 billion-euro bailout last year.

Former ECB Vice-President Lucas Papademos is most frequently mentioned as a candidate to replace Papaconstantinou, who Greek media have said may be on his way to the Foreign Ministry.