MADRID - Spain's Prime Minister Jose Luis Rodriguez Zapatero on Tuesday dumped veteran economy minister Pedro Solbes in a cabinet reshuffle aimed at reviving a government struggling with a deep recession.

Solbes, a former European commissioner for economic and monetary affairs, will be replaced by Elena Salgado, currently public services minister and an experienced manager, but a little known quantity for financial markets.

Zapatero also said he was replacing Public Services Minister Magdalena Alvarez with experienced Socialist Party official Jose Blanco. Among other changes, he appointed Andalusian politician Manuel Chaves to his cabinet, which has sometimes seemed to lack political direction as it grapples with the crisis.

This government team has been chosen in order to overcome the crisis and forge a new economic model, Zapatero told a news conference, in which he praised Salgado's talents as an administrator and said that she would be given the task of implementing existing policies as well as possible.

Just a year after winning a fresh four-year term, Zapatero's Socialists fell behind the conservative Popular Party in an opinion poll on Sunday. Despite 70 billion euros ($94.73 billion) in government spending plans to keep the economy ticking over, unemployment has almost doubled from pre-crisis levels to 15.5 percent - the highest rate in the European Union.

After losing regional elections in Galicia last month, Zapatero must retake the political initiative: the government has to negotiate support for key economic legislation with Catalan nationalists, and unions threaten a general strike if he meets demands from business to make hiring and firing easier.


The prime minister had apparently planned a surprise announcement of Salgado's appointment, following what was hoped to be a blaze of good publicity surrounding his participation in the G20 summit and meeting with U.S. President Barack Obama.

But the news was leaked to Spanish media, which quoted anonymous Socialists complaining Salgado lacked the necessary experience and opposing the return of Chaves, once a key figure but long exiled from national politics.

The leak enabled opposition leader Mariano Rajoy to react to the cabinet changes a day before Zapatero announced them, calling for the captain to be changed, not the crew.

Solbes, 66, had frequently expressed a wish to retire and had also publicly contradicted Zapatero. When the prime minister said he could further boost public spending in order to revive the economy, Solbes said there was no more money.

Current plans are expected to blow out the budget deficit to 5.8 percent of gross domestic product this year, well above the 3 percent euro area limit.

News of Salgado's appointment had little effect on Spanish stock markets, traders said. Analysts speculate she might be more willing to do Zapatero's bidding than Solbes.

Zapatero was cautious when asked if further stimulus was on the way to revive an economy which some analysts fear could be heading for an extended period of stagnation following the collapse of a property boom.

We have to be prudent regarding any additional fiscal effort. We have to concentrate more on making sure the moves already announced are effective, he said.