During his time as governor of the central bank, Papademos was involved in Greece's transition from the drachma to the euro as its national currency.

After a week of political turmoil and negotiations between parties triggered by Papandreou's resignation, Papademos was installed as Prime Minister of Greece on 11 November 2011, unveiling his provisional Cabinet shortly afterwards.

[16] Papademos stated that his government's primary task would be to facilitate the financial bailout from the European Union – which was provided on the condition that severe budget austerity be implemented – and to lead the country until elections could be held.

[18] Papademos also declared in January that his provisional government would last until at least April, instead of February as was originally planned, so that further austerity measures could be implemented before an election.

[19] In late April 2012, Papademos announced that he would ask President Karolos Papoulias to dissolve the Hellenic Parliament, paving the way for a general election to be held on 6 May 2012.

On the same day, Papademos wrote to President Papoulias to inform him that the Ministry of Finance could only afford to pay salaries until the end of June, and that the need for Greece to recapitalise her liquid assets was "urgent".

[20] In the wake of the announcement of the election Papademos stepped down, proposing Panagiotis Pikrammenos – a judge and the President of the Council of State – to replace him as caretaker prime minister until a permanent government could be formed.

[25] In Athens on 25 May 2017, a suspected letter bomb exploded within his car, causing non-life-threatening arm, leg and stomach injuries to Papademos.