Greek recession deepens as austerity takes its toll August 15, 2010Posted by Yilan in Yunanistan.
Tags: Athens, Greece, Recession
An Athenian walks past a closed clothes shop in central Athens
AUSTERITY measures have plunged Greece deeper into recession, triggering a 1.5 per cent fall in economic output in the second quarter.
The figures, which have revived concerns over the country’s ability to weather its sovereign debt crisis, come amid a welter of statistics that highlight the diverging fortunes of euro-zone states.
Separate data show that while output by Greek factories, miners and utilities fell by 2.7 per cent in the second quarter, Germany recorded a record rise in industrial output of 4.8 per cent.
Euro-zone GDP figures, to be published today, are expected to show that the overall recovery in the 16-nation region has gathered pace, rising by 0.7 per cent in the second quarter after a 0.2 per cent increase in the first quarter.
The drop in Greek output confounded economists’ expectations for a more modest decline of 1 per cent.
While policymakers have met their deficit-reduction goals, ensuring that the country will receive the next trance of funding from the International Monetary Fund and the Euro zone, the latest figures show that the austerity measures are taking a severe toll – with economists warning that the worst is still to come.
Giada Giani, of Citigroup, said: “We think the largest hit to private consumption from tighter fiscal policy is probably still ahead of us. We expect growth to remain negative for the rest of the year, with an average decline of around 3.5 per cent for 2010.”
Ben May, of Capital Economics, warned that Greece could be forced into even more drastic fiscal measures next year.
“Government tax revenues have been much weaker than expected,” he said. “Since around three quarters of next year’s Greek fiscal squeeze is expected to come from higher revenues, there is clearly a risk that the government could struggle to meet its fiscal targets for 2011.”
Tax revenues rose by 4.1 per cent in the first half of the year, against forecasts for a 13.7 per cent rise.
Euro-zone industrial output wobbled in June, falling by 0.1 per cent after a 1.1per cent increase in May.
Economists who had forecast that output would rise by 0.6 per cent pointed out that monthly data was volatile and did not signify that the region was faltering.
Peter Vanden Houte, of ING, said: “It’s definitely too soon to declare the EU16 manufacturing boom over. That said, with the US and China showing signs of slowing it would be foolish to believe that Europe would remain unaffected. We therefore expect some growth deceleration towards the end of 2010.”
Output rose by 8.2 per cent on an annual basis, down from 9.9 per cent growth in the year to May.