Recession in Greece deepens

Tuesday 14th February 2012

In the final three months of 2011 saw the Greek economy contract by 7% compared with the same period in the previous year.

The news will further complicate the predicament on a government caught between riots at home and pressure from eurozone leaders to force through deep spending cuts in exchange for a further €130 billion bail-out.

The next phase of the bailout is dependent on Greece implementing a €325 million package of budget cuts.

In the third quarter of 2011, the Greek economy contracted by 5%; overall in 2011, the Greek economy shrank by 6%, an increase on earlier estimates and the fifth year of recession.

Published by Elstat, Greece’s the national statistics body, the preliminary data shows that Greece’s economy has now shrunk in every quarter bar one since mid-2008.

The Greek government is still working on a new package of austerity measures. Politicians are looking to save another €325 million from the budget and the eurozone bloc also insists that Greek leaders give "strong political assurances" on the implementation of the packages.

The austerity cuts include 15,000 public-sector job cuts by 2015, liberalisation of Greece’s labour laws, lowering the minimum wage by 20% from €751 euros a month to €600 euros and negotiating a debt write-off with banks.

The government says tax collections have fallen short as cash-strapped consumers spend less. But the EU has said that the Greek government has been slow to sell state-owned properties to raise cash and to adopt labour and pension reforms.

The Greek government says its budget deficit this year could reach 8.3%of the country's economic production, or even more, compared to the 7.6% target.

Today’s scheduled meeting to discuss the second Greek bail-out has been called off amid accusations that the debt-stricken country has failed to offer the required political pledges.

Euro Group President Jean-Claude Juncker says that further technical work is needed by the country in "a number of areas".

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