Greece introduced a new 5,000 drachma banknote last Wednesday with hopes that this is the last time a new drachma note goes into circulation before the country adopts the European single currency.

Greece was left out of the first wave of EU member-states adopting the euro, but hopes to join the euro club by the year 2001. The Prime Minister, Mr Costas Simitis - a technocrat who succeeded the late Andreas Papandreou - has made entry into Economic and Monetary Union (EMU) by that date the cornerstone of his administration.

As Greece suffers under a heatwave, Mr Simitis has seen the electorate grow cooler about his cabinet and his policies of privatisation and streamlining the state sector. His popularity is falling and he is embattled on various fronts by unions sometimes violently opposed to his reforms. A recent opinion poll showed his personal rating at a new low and his Panhellenic Socialist Movement (Pasok) trailing Mr Kostas Karamanlis and his conservative opposition party, New Democracy.

But Mr Simitis says he will not be swayed simply to promote popular measures. "We are indifferent to the short-term political cost. We are taking the necessary reforms and we are fighting for our country and the Greek people," he said. "EMU is not an issue just for banks and the stock exchange, but for all of us."

However, as the first modernising measures have been introduced, Mr Simitis has found himself beset by unhappy workers and old-guard members of Pasok loyal to Papandreou's populist policies.

Recent problems have included:

workers at Ionian Bank, about to be privatised, went on strike for 45-days, rioted at a shareholders' meeting to approve the sell-off and called another 24-hour strike at the end of last week;

substitute teachers facing new qualification exams took part in street conflicts with riot police;

Olympic Airways, still deeply in debt, has continued to cancel flights on an almost daily basis despite a survival plan pushed through by the government;

transport workers have threatened to strike indefinitely if the government goes through with substantial cost-cutting plans, promising a politically difficult summer for tourists and Greeks alike.

The privatisation of the Ionian Bank is seen as a test case for the government's efforts to streamline the public sector in time for EMU in 2001. Ionian's parent, Commercial Bank, approved the sale at a turbulent shareholders' meeting after angry trade unionists opposing the privatisation attacked members of management. The meeting was reconvened later at another building, behind closed doors and under heavy police protection.

The privately-owned Alpha Credit Bank, which is bidding for a majority stake in Ionian, was the target of left-wing urban guerillas who bombed a branch office in Athens last week.

Mr Simitis says he understands the worries facing voters as they see their jobs threatened by privatisation and their pay rises slashed by the need for fiscal austerity.

"I know and empathise that, in this transitional period, there are a lot of problems and pressing needs," he said. "That is why we are trying to create policies for job creation, for low-income pensioners and for the truly needy."

But he said measures needed to put Greece in EMU were already bearing fruit. Inflation had come down, the deficit was being reduced and real income was on the rise, he said.

Mr Simitis said most Greeks supported what his government was doing and knew that it needed to be done despite the pain. "Behind the screaming reaction of minorities, there is the silent majority of agreement," he said.

The timetable for privatisation includes the part-floatation of 11 state firms, starting with Hellenic Duty Free Shops and ending with invitations in September 1999 to tender for 49 per cent of Piraeus Port. Other state corporations on the list include OTE Telecom, the Corinth Canal and the Athens Stock Exchange.

Earlier this week, the National Economy Minister, Mr Yannos Papantoniou, told the newspaper To Vima: "With a 10-year delay, we are trying to accomplish half of what has been accomplished in other European countries."

He flatly denies promises made by other ministers that the government will "water down" its measures.

However, rumours of an imminent cabinet shuffle were fuelled this week after the Development Minister, Ms Vasso Papandreou, told the daily Ta Nea: "We made mistakes that we must not repeat."

A number of newspapers are speculating that Mr Papantoniou is on his way out.

Meanwhile, nostalgia for the seemingly carefree days of Papandreou, who died two years ago, is enjoying a revival. "He inspires us. He leads us," says a poster appearing throughout Athens showing a young Papandreou waving his party's socialist manifesto.