Greek GDP sinks as crisis batters economy

Greece’s economy contracted 6.2 per cent in the second quarter  as belt-tightening to slash deficits continued to take a toll, hampering efforts to meet targets set by the country’s international lenders for continued bailout funding. Currently in its fifth consecutive year, the economic downturn has driven unemployment to record highs, with nearly one in four Greeks unemployed and more pain expected ahead. “It’s not a major surprise, we knew the Greek economy was continuing to struggle but hopefully it’s some sign that the rate of decline is starting to bottom out,” said Chris Williamson, chief economist at London-based research firm Markit. “Hopefully the first half of the year was as bad as it gets and we’ll see some improvement now,” he said. The second quarter preliminary GDP estimate was based on seasonally unadjusted data and follows a 6.5 per cent GDP decline in the previous quarter. Scrambling to nail down 11.5 billion euros of savings and  bring the bailout programme back on track, the government plans to revive a labour reserve measure targeting 40,000 public servants for eventual dismissal.  The jobless rate has already climbed to 23.1 per cent, with nearly 55 per cent of those aged 15-24 out of work, a desperate situation that fed into the popularity of anti-bailout parties in Greek elections this year.  The scale of the contraction is making it harder for the government to meet revenue targets and reduce the budget gap. Think tank IOBE expects gross domestic product will shrink 6.9 per cent this year. Greece’s statistics service ELSTAT did not provide detailed estimates on the GDP components -consumption, capital investment, exports and imports -in the second quarter. Rescue aid The country is relying on two financial rescue packages backed by the EU, the International Monetary Fund and the European Central Bank worth around 240 billion euros ($295 billion) for its economic survival. Last year, private creditors agreed to write-off more than 100 billion euros in debt, roughly half the amount they were owed, as part of a second bailout programme. Harsh austerity measures and economic reforms linked to the aid agreements have taken their toll on the economy, with unemployment hitting record highs. The latest official data, made public last week, showed a record 23.1 per cent jobless rate for May, with almost 1. 5 million people registered as unemployed. The conservative-led coalition government has yet to finalise spending cuts of about 11.5 billion euros in order to unlock its next aid installment wort some 31 billion euros. The cuts will be presented to the auditors of the country’s international EU, International Monetary Fund and European Central Bank creditors, who visited Athens recently and are expected to return in September. The so-called troika of auditors has said it will remain in the Greek capital for the entire month. Following a two-month political deadlock, as a result of back-to-back elections in May and June, Greece has fallen behind in the implementation of reforms that are part of its loan agreements, amid mounting international pressure. In an effort to ensure that international support for Greece will continue, Greek Prime Minister Antonis Samaras is scheduled to meet head of the eurozone finance ministers group Jean-Claude Juncker in Athens on August 22. Samaras will also meet German Chancellor Angela Merkel in Berlin on August 24 and French President Francois Hollande the next day in Paris. On Monday, deputy head of Merkel’s parliamentary bloc Michael Fuchs told German newspaper Handelsblatt that Berlin is ready to use its “veto” if Athens does not fully comply with the terms of the rescue packages. From:gulftoday