ATHENS (AFP) ― Greece took a step from debt crisis to the challenges for the next government on Monday when finance minister resigned to prepare the socialist PASOK party for elections expected within two months.

Greek Finance Minister Evangelos Venizelos resigned his government job after being elected on Sunday to head the Socialist party PASOK, in the run-up to elections.

Polls suggest that PASOK will pay a heavy election cost for pushing through austerity measures in the two and a half years since the beginning of a debt crisis left by the conservative predecessors.

Greece still faces huge challenges in enacting reforms linked to its second bailout put in place about a week ago under interim Prime Minister Lucas Papademos, who has led a coalition between the socialists who held power up to late last year and the conservative New Democracy party.

Whatever the outcome from the polling booths, the next government must turn around an economy that new central bank data on Monday said shrank by 6.9 percent in 2011 and by another possible 4.5 percent this year.

Venizelos acknowledged as much in his resignation speech saying Greece must remain “very vigilant and persevering to achieve the budget targets, bring in public revenues, control expenditure and apply the economic program.”

Early legislative elections are to be held by the middle of May under an agreement between the conservatives and PASOK which underpins the interim arrangement headed by Prime Minister Papademos, a former central banker.

The exact election date is expected to be announced next week.

Opinion polls suggest that PASOK will do badly in the elections because it has been involved in imposing deep austerity in the last two years but Venizelos said that he hoped to achieve victory over his conservative rival, Antonis Samaras.

Venizelos, who has played a central role in recent months in negotiating a second bailout for Greece coupled with new austerity measures, made his announcement after meeting President Carolos Papoulias and before meeting Papademos.

“I had the opportunity at a farewell meeting this morning at the finance ministry to give my last instructions,” he said.

Venizelos, aged 55, has been finance minister for nine months and he was the only candidate to lead PASOK.

He was elected to the post late on Sunday to succeed George Papandreou, who had led the party in 2004 and won power at the end of 2009, only to be engulfed by, and eventually to fall victim to, the debt crisis late last year.

PASOK is one of the two main parties in an interim coalition government established to restore confidence, negotiate a second rescue and ensure promises to reform are applied.

Media reports suggest that the finance portfolio might be taken over by Papademos or be handed to the number two at the ministry, Philippos Sahinidis, who has been in his job since October 2009.

An announcement was expected on Tuesday.

Venizelos was opposed initially to the tough measures to correct public finances imposed by the European Union and International Monetary Fund for a first bailout in 2010.

Since the formation of the interim government he has worked with Papademos to draft, negotiate and enact the terms of a second rescue involving a complex debt restructuring and bond swap and further deep action to cut spending, raise taxes and reform the economy.

Venizelos, considered to be a brilliant professor of constitutional law, joined PASOK at the end of the 1980s, and since then has been continuously elected a member of parliament, and been appointed to several ministries.

The debt crisis turned another difficult page on Monday when payouts from insurance polices on Greek bonds, known as credit default swaps, were set to reach about $2.5 billion.

An auction by CDS regulators established a recovery rate of 21.5 percent of face value on insured bonds, which means that the default swaps will make up the remaining 78.5 percent for policyholders.