UPDATE 4-Greek PM sacks finance minister in reshuffle
(Updates with industrialists, government official's comments)
By Dina Kyriakidou and George Georgiopoulos
ATHENS, Jan 7 (Reuters) - Greek Prime Minister Costas Karamanlis sacked his finance minister on Wednesday in a cabinet reshuffle to try to shore up his government's popularity, hit by riots, scandals and economic woes.
Finance Minister George Alogoskoufis, 53, was replaced by one of his deputies, Yannis Papathanassiou, 55. Foreign Minister Dora Bakoyanni will stay, the government's spokesman said.
Alogoskoufis was ousted after being criticised even from within his own party for a series of misfired policies. His successor faces the tough task of balancing budget revenue needs with measures to help the poor as the global downturn begins to hit Greece.
"It's a difficult task, the global crisis reaches Greece, but he comes from the markets, knows the markets and the ministry," said Costas Panagopoulos, head of the ALCO polling agency.
A series of scandals and discontent with economic measures have eroded the ruling New Democracy's support and saw the opposition socialists lead opinion polls for the first time in years, raising the spectre of snap elections.
"The aim of the reshuffle was to boost the effectiveness of the state mechanism at a critical moment for the European economy," a senior government official told Reuters, adding that Karamanlis sought to appoint the best technocrats on his bench.
Alogoskoufis, credited with an EU-applauded fiscal tightening soon after New Democracy swept to power in 2004, drew fire for basking in a consumer-driven GDP growth of about 4 percent and neglecting a ballooning public debt and current account deficit, threatening jobs.
"Karamanlis wants to show he is listening to public opinion and the best way to do that is to focus on the finance minister," said Theodoros Livanios, head of the Opinion polling agency. "He wants to make clear this is a substantial and not a cosmetic reshuffle."
RIOTS ADD TO WOES
Adding to the government's troubles, a police shooting of a teenager on Dec. 6 sparked the worst riots in decades. Analysts said the violence was fuelled by public discontent.
Unions had been battling Alogoskoufis's privatisation plans and industrialists had repeatedly asked for measures to boost eroding Greek competitiveness.
"The challenges of 2009 demand a substantial change in how we face critical problems and a strong and effective governance. This is what is urgently required from the new cabinet," said Dimitris Daskalopoulos, head of Greek industrialists SEV.
Alogoskoufis appeared to seal his fortunes when he announced a series of tax collecting measures in late August as other European economies braced for collapse. He unveiled a 28 billion euro bank support package before any measures to aid the poor, who officially make up one fifth of the Greek population.
"Alogoskoufis became the focus of criticism by most economic groups and was perceived as taking care of big bankers, that he had lost his touch with the small and mid-sized business," said Alexander Moraitakis, head of the Greek brokers group.
Although analysts see little room for manoeuvre on the economic front, Papathanassiou, a conservative deputy who has also served at the development ministry, is seen as a good choice for the post as a ministry hand with a good track record.
The Athens stock exchange was up 2.70 percent in late trade on improved sentiment, outperforming European peers.
Other key interior, labour and defence ministers will stay. The development, transport, education and tourism portfolios will change hands. The new cabinet will be sworn in on Thursday.
The main opposition socialist PASOK party said the reshuffle would do little to resolve the country's problems.
"Unfortunately, in this reshuffle, one person remained in his position: the prime minister. The country needs a new PM and a new government to escape this crisis," said PASOK spokesman George Papakonstantinou.
