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Greek GDP looses 2.8 billion euro a week due to capital controls

30 July 2015 / 11:07:12  GRReporter
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The parliamentary State Budget Office has sharply criticised the government's actions over the past six months, which have caused the recession in the Greek economy and a loss of 2.8 billion euro of GDP on a weekly basis.
In their quarterly report, the experts actually directly blame the current situation in the country on the government and totally reject the rhetoric that the agreement with creditors is equal to a coup.

Their forecasts indicate that the next 2-3 years "will be difficult for politics, society and economy," warning that "there is no difficult situation that cannot worsen" and that the risk of default and exit from the euro zone exists even today. The experts call on the Greek government to commit to implement the provisions of the rescue programme.

"The state of the economy in the first half of 2015 deteriorated and therefore the country was back into recession," they say, indicating the relevant causes,

1. The protracted negotiations
2. The failure to reach an agreement with creditors
3. The combination of poor funding through the Emergency Liquidity Assistance and the increased withdrawal of deposits
4. The government withdrawal from negotiations
5. The suspension of loan repayments to the International Monetary Fund
6. The announcement of the referendum
7. The expiry of the second bailout programme at the end of June 2015
8. The election process and general insecurity

"At some point it was apparent that the country was headed for a chaotic default," the Office indicates. It is noteworthy that immediately after the elections on 25 January, it had stated that "an agreement with the institutions needs to be concluded as soon as possible."

In the report that it released yesterday, the Office again states that "a rapid agreement with the European Stability Mechanism based on a reform programme that the Greek government and society will commit to implement, despite the political and ideological difficulties, was and continues to be preferable to the continuation of uncertainty and a possible chaotic default."

The parliamentary State Budget Office describes the losses incurred by the Greek economy over the past six months. In particular, experts point out the following:

- 4-10 billion euro of GDP were lost in 2015, whereas the new forecast is for recession in the range of 2-4% this year.

- The decline in GDP on a weekly basis after the imposition of capital controls is estimated at 2.8 billion euro for the period from July to September if consumption reaches 80% or at 1.75 billion euro if consumption is around 50%.

- The deposits withdrawn from banks from November 2014 until June 2015 were to amount of 37 billion euro.

- It is possible that a primary deficit of 1% of GDP be reported in 2015.

In parallel, the parliamentary State Budget Office totally rejects to define the agreement reached at the EU summit as a 'coup'. Its experts determine it as 'misleading' and add that it "does not help the political choice of the government, as it hampers the rational discussion of concrete measures and reforms." "The Greek government signed the specific statement as a result of the support for negotiations it received from the majority in parliament, which was ratified by the adoption of the relevant law".

The Office warns that the coming months and probably the next 2-3 years will be difficult for Greek politics, society and economy, indicating that the efforts to achieve consolidation and growth "require broader political consensus that seems to be created at a more permanent level in the political arena."

Tags: EconomyPoliticsParliamentary State Budget OfficeGDP lossesRecessionCapital controls
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