| CATEGORY: INTERNATIONAL ECONOMIC |
Tue 24 Jul 2012
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LONDON (SHARECAST) - The situation in Greece seems to going from bad to worse as Prime Minister Antonis Samaras warned that economic contraction could be deeper than seven per cent this year, with growth not returning until 2014.
The country’s central bank had forecast economic activity to fall by around 5%, the OECD expects a 5.3% contraction and the European Commission’s last estimate was 4.7%.
Meanwhile, the Troika (inspectors from the European Commission, the International Monetary Fund and the European Central Bank) has arrived in Athens today to evaluate the government’s progress on implementing reforms in accordance with its bailout terms.
According to the Greek online newspaper ekathimerini, the Hellenic Republic is still struggling to find an additional €2.5bn in cuts as part of the bailout agreement in which it is required to reduce spending by €11.5bn in 2013 and 2014.
According to the Greek webpage, Samaras will meet with the other two coalition government leaders, Pasok’s Evangelos Venizelos and the Democratic Left’s Fotis Kouvelis, on Thursday afternoon to discuss additional measures with Finance Minister Yannis Stournaras. Samaras is then expected to meet with the Troika on Friday.
Greece remains in the spotlight as one of the major risks for all Eurozone members. In fact, Moody’s cut the outlook on the triple-A ratings for Germany, the Netherlands and Luxembourg last night to negative because “the risk of an exit by Greece from the euro area has increased relative to the rating agency's expectations earlier this year.”
The agency feels that there would be a “strong policy response” if that situation arose, but still believes that it would “set off a chain of financial-sector shocks and associated liquidity pressures for sovereigns and banks that policymakers could only contain at a very high cost.
“Should they fail to do so, the result would be a gradual unwinding of the currency union, which Moody's continues to believe would be profoundly negative for all euro area members.”
JM
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