More austerity planned as Greek GDP continues huge contraction

Aug 13, 2012

Greece, in ninth straight quarter of GDP decline, must agree yet more austerity cuts by next month

THE GREEK economy shrunk by a staggering 6.2 per cent in the last quarter, according to official figures. The contraction comes on top of 6.5 per cent negative growth in the first quarter of 2012 and a 7.5 per cent decline in the final quarter of 2011.

The Greek economy, which has now contracted for nine quarters in a row, is expected to contract by 4.5 per cent over the whole of 2012.

The 'troika' of the European Commission, International Monetary Fund and European Central Bank are due to decide next month on whether Greece has made enough progress in its ongoing austerity programme to receive the next €31bn tranche of its €130bn bailout package.

Before that decision, the Greek government must finalise spending cuts of €11.5bn. Reuters reports that the coalition is to revive a plan targeting 40,000 public servants for eventual dismissal. The measure will add to unemployment of 23.1 per cent.

Bloomberg observes that the austerity measures forced on Greece by the troika are exacerbating the country's protracted economic contraction.

Elena Panaritis, a former MP for the socialist Pasok party, told Bloomberg Television: "We keep on pushing more austerity simply because we have to meet conditionalities, and there is very little done really in terms of growth."

But Chris Williamson, chief economist at Markit, suggested analysts were taking the terrible data in their stride: "It's not a major surprise, we knew the Greek economy was continuing to struggle but hopefully it's a sign that the rate of decline is starting to bottom out," he said. "Hopefully the first half of the year was as bad as it gets and we'll see some improvement now."

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