Dora Bakoyanni remained in her post as Greece's foreign minister in the newly re-elected conservative government, indicating that securing better relations with traditonal foe Turkey was high on the agenda.
The conservative New Democracy Party returned to power under the leadership of Karamanlis, 52, following elections on September 16, but with considerably fewer seats in the 300-seat parliament.
Since his landslide victory in 2004, which ended 11 years of continuous Socialist rule, Karamanlis saw his representation in parliament drop by 13 seats to 152 seats, instead of the 165 he won in previous elections.
Fewer seats will make it harder for the next government to carry out austere economic and education reforms, which analysts say are necessary to move the country, the Eurozone's second poorest member, forward.
Determined to move forward his party's tough economic agenda, the prime minister reappointed George Alogoskoufis as finance minister.
One of the most immediate tasks facing the newly elected government is to overhaul the pension system, which risks going bankrupt within 20 years due to an ageing population as well as to complete state privatizations.
Greece's per capita gross domestic product is the second lowest in the Eurozone after Portugal, and nearly 20 per cent of Greeks live below the poverty line.
Karamanlis has been applauded by the European Union for cutting deficits below the 3-per-cent limit and creating thousands of jobs, but the unemployment rate still hovers above the EU average.
Despite their win, the conservatives appeared to have lost some support after voters opted to sway toward many of the smaller parties, following financial scandals and the devastating wildfires in which 65 people died and thousands of acres of forest and agricultural land were destroyed.
A far-right party, LAOS, that opposes Turkey joining the EU and has been accused of racism and anti-Semitism managed to become the first right-wing nationalist party to enter Greece's parliament after elections.
LAOS, or the Popular Orthodox Party, won 3.79 per cent of the vote and 10 seats, just above the 3-per-cent threshold needed to enter parliament for the first time.
Commentators say the party's entry into parliament could serve as a problem for Bakoyanni, who is determined to proceed with a foreign policy of better relations with neighboring Turkey. dpa cp gma
