As it exercised power for the next eight years, PASOK did oversee considerable change in some areas. The new government brought in a sweeping domestic reform program under Papandreou's "Contract with the People". Many initial reforms were long-overdue and cost little. New laws legalized civil marriage, abolished (in theory) the dowry system, eased the process for obtaining a divorce, and decriminalized adultery. Other laws enhanced the legal status of women. The university system was overhauled, giving more power to staff and students. A comprehensive national health service was introduced, for the first time making modern medical procedures available in rural areas.

Some of PASOK's reforms met considerably less success, especially in government and economic reform. The pervasive blanket of smog over Athens, instead of being banished as promised, became thicker in the early 1980s. An attempt to decentralize local government foundered because local administrative bodies had no financial base. And, after PASOK reforms initially gave trade unions greater freedom of action and improved labor relations, circumstances soon caused Papandreou's labor policy to reaffirm state control over labor-union activity. The selective socialization of key means of production, which was to emphasize worker participation and improve productivity, led instead to increased state patronage for inept companies and continued state control of unions.

Papandreou also attempted to further the national reconciliation by officially recognizing the role of the resistance during World War II, by granting rights of residence in Greece to those who had fled to communist countries after the Civil War, and by ending all public ceremonies which celebrated the victories of the National Army over the DAG. Only Greek refugees were allowed to return, however, excluding a large number of Macedonian Slav members of the DAG.

The greatest challenge to PASOK in the 1980s was managing the economy. The main problem was paying for social programs in the PASOK platform while keeping Greece militarily strong. In keeping with his campaign promise, Papandreou initially raised middle and low incomes, instituted price controls, and introduced tax incentives on investments, giving the state an even larger role than it had had under the ND regime. But by 1985, the annual inflation rate had risen to 25 percent, which led to devaluation of the drachma in what was presented as an austerity plan. The budget deficit still grew, eventually reaching 10 percent of the gross national product. The public debt that spiralled out of control in the late 1980s continues to be a serious deterrent to economic growth in Greece in the 1990s.