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Athens (AFP) - Greece named hardline leftwing economist Yanis Varoufakis as finance minister, handing him the pivotal task of renegotiating the debt-stricken nation's bailout with international creditors after it voted overwhelmingly to reject years of austerity politics.
The appointment of Varoufakis to the potentially explosive role is seen as a signal that the new anti-austerity Syriza-led government will take a hard line in haggling over the 240-billion-euro ($269 billion) EU-IMF package.
The polyglot Varoufakis, 53, a professor nicknamed "Dr Doom" for his stance on Greece's economic woes, is a vocal critic of the conditions imposed in return for the 2010 bailout and argues the shattered country can never recover until they are relaxed.
His was the most eye-catching appointment in 40-year-old Prime Minister Alexis Tsipras's new cabinet, which gave the first glimpse of a government that promises to challenge at every level the eurozone's belt-tightening measures.
Panos Kammenos was named defence minister in return for leading his small nationalist Independent Greeks (ANEL) party into a coalition government with Syriza.
Kammenos threatens to be a controversial member of the government because of his claims that Germany, and its insistence on budgetary rigour, is the main cause of Greece's economic misery.
Greece's European partners have been quick to pour cold water on the issue of debt forgiveness since Syriza stormed to a stunning election victory in Sunday's snap general election.
German Chancellor Angela Merkel's spokesman said Monday that Greece's membership of the eurozone "means... sticking to its previous commitments."
Merkel offered warmer words to Tsipras on Tuesday, wishing him "much strength and success".
"You are taking office at a difficult time in which you face a great responsibility," Merkel said in the message from the chancellery.
But in a newspaper interview to appear Wednesday, a member of Germany's Bundesbank central bank warned Athens of "fatal consequences" if it rejected the bailout terms.
"If the continuation of the programme of aid for Greece is called into question... Greek banks would lose access to central bank funds," Joachim Nagel told the daily Handelsblatt. "It would have fatal consequences for the Greek financial system."
In a sign of the EU's willingness to engage with the new leaders in Greece, the head of the 19-nation Eurogroup countries who use the single currency, Jeroen Dijsselbloem, had a 15-minute telephone conversation with Varoufakis on Monday.
But Dijsselbloem, the Dutch finance minister, said there was "not a lot of support" for Tsipras's insistence that a chunk of the debt should be written off.
The Greek stock market plunged six percent earlier Tuesday, in a sign of nervousness at the new government's intentions as European stock markets too fell on growing anxiety that Athens was set on a collision course with its creditors.
Fears that Greece could be forced out of the eurozone if it defaults on its debt saw the euro briefly hit an 11-year low against the dollar Monday, but it rose on Tuesday.
The EU has set the end of February as the deadline for Greece to carry out more reforms in return for a seven-billion-euro tranche of financial aid from the 28-member bloc and the International Monetary Fund.
Tsipras, who has vowed to reverse many of the severe spending cuts and other measures that Greece's creditors insist on, must decide whether to prolong the deadline.
- 'Humanitarian catastrophe' -
Syriza claims the stringent conditions attached to the bailout -- including wage and pension cuts and widespread privatisations --have caused a "humanitarian catastrophe" in Greece.
It wants to release an immediate 1.2 billion euro package to increase the minimum wage and pensions for the poorest.
The first foreign dignitary to visit Greece since Syriza took power will be the social democrat head of the European Parliament, Martin Schulz, on Thursday.
Analysts have described Syriza's coalition with ANEL as "unnatural" and potentially short-lived, saying that the smaller party is unpredictable, while the two parties differ starkly on immigration policy.
However, the two parties -- who together have 162 seats in the 300-member parliament -- share a common opposition to the EU-IMF bailout.
The IMF extended an olive branch to the new Greek government, saying it was prepared to continue its financial support to the country.
"We stand ready to continue supporting Greece, and look forward to discussions with the new government," IMF managing director Christine Lagarde said in a statement.
Greece's economy is set to emerge from recession after shrinking by a quarter in five years, leaving one in four out of work.
Many Greeks say that even if Tsipras can deliver on a fraction of what he has promised, their lives will improve.
After the new prime minister was sworn in on Monday, Eleni, 41, said: "We are just asking to be able to live like any other European citizen.
"At the moment if you go to a state-run hospital in Greece, you feel as if you are in a warzone.
"Repaying the debt does not justify subjecting people to such suffering," she said.
Sunday's poll was Greece's fourth in five turbulent years, including back-to-back votes in 2012.
Tsipras stands alone as Europe's first anti-austerity leader for the moment, but Syriza's victory could inspire other anti-austerity parties, including Spain's Podemos, which has topped several opinion polls and is aiming for an absolute majority in the Spanish election in November.