Cyprus President Appoints New Cabinet

Cyprus' embattled president reshuffled his 11-member cabinet on Friday, in an attempt to combat a political and economic crisis spawned by a deadly blast that wrecked the island's main power station and sapped confidence in the government.

President Dimitris Christofias appointed longtime ally and former communications minister Kikis Kazamias to the key finance ministry post.

Kazamias, who has also served on the European Court of Auditors, has his work cut out for him to shore up public finances amid growing speculation that the EU member country may be forced to seek a bailout.

The island's €17.4 billion ($24.76 billion) economy has already been shaken by a string of credit rating agency downgrades mainly because of the banking sector's large exposure to crisis-afflicted Greece.

But the detonation of dozens of seized containers packed with Iranian munitions at a naval base last month — that killed 13 people and cut the island's power supply by half — is pushing the economy to the brink.

So far, EU officials say there are no plans for any Cyprus bailout. But a University of Cyprus study released this week said the economy will contract by 2.4 percent of gross domestic product this year and push unemployment up by a percentage point. The EU had projected growth of 1.5 percent of GDP for Cyprus this year.

Boding well for Kazamias are signs that after much wrangling, the island's powerful trade unions are falling in line with calls for bigger cost cuts, especially in the public sector that takes up more than a quarter of all government spending.

Negotiations on a package of spending cuts and tax hikes are expected to wrap up by the middle of next week.

Career diplomat Erato Kozakou-Marcoullis moves over from the communications ministry to foreign affairs which she headed briefly in the previous administration. She takes over from Markos Kyprianou who resigned in the wake of the explosion which many Cypriots saw as a result of official negligence. The defense minister also quit after the blast and Christofias has rebuffed calls for his own resignation.

Christofias' woes were compounded this week when Kyprianou's center-right DIKO party walked out of the ruling coalition, citing strong disagreements over the president's handling of talks with breakaway Turkish Cypriots to reunify the divided island.

The move left Christofias with only the backing of his communist-rooted party AKEL which holds 19 of the 56 parliamentary seats, hobbling his ability to pass legislation for the remaining 18 months of his five-year tenure.

However, opposition parties have indicated they would throw their support behind legislation aimed at saving the economy from ruin.

Interior Minister Neoklis Sylikiotis keeps his portfolio, as does Justice Minister Loucas Louca and Labor Minister Sotiroulla Charalambous. Agriculture Minister Demetris Eliades shifts to Defense.

New faces include Giorgos Demosthenous, Efthymios Flourentzos, Praxoulla Antoniadou, Stavros Malas and Sofoklis Aletraris who take over the education, communications, commerce, health and agriculture ministries respectively.