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Greek recession deepens, lenders will require new measures for the sixth tranche

08 September 2011 / 20:09:02  GRReporter
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The Greek GDP for the second quarter of 2011decreased by 7.3 per cent compared with same period last year, announced the National Statistical Service. Consumer spending fell by 6.8 per cent, while investment per unit of capital fell by 17.9 per cent.

The turnover of exports of goods and services fell by 1.4 per cent. Exports of goods increased by 2.2 per cent, but the exports of services fell by 3.8 per cent. Meanwhile, the trade deficit decreased by 26.5 per cent, partially offsetting the decline in GDP.

At the same time, Greece fell seven positions in the list of international competitiveness report for 2011 - 2012, which the World Economic Forum released. The country occupies the 90th place among 142 countries today, while two years ago it was 71st and 83rd last year. It is an indicative fact that even African countries like Botswana are ahead in the list. From the neighbouring countries, Bulgaria is 75th, Turkey - 59th, Albania - 78th and Macedonia is 79th.

Analysts argue that the decline in Greece’s competitiveness is not only due to the extremely negative macroeconomic environment globally, but also to the deterioration of all individual factors such as bureaucracy, infrastructure and innovation. The only exceptions are reported in the areas of health and primary education.

In their report, the World Economic Forum analysts pay special attention to the labour market, which is still blocked by various restrictions. The text points out that the inefficient labour market, which continues to limit the ability of Greece to emerge from the crisis, emphasizes the importance of positive efforts to raise the retirement age and the establishment of flexible labour arrangements. The assessment of the labour market performance is 3.6 with a maximum value of 7, which puts the country in the 126th place in the world.

According to the National Statistical Service, the unemployment rate in Greece has reached 16 per cent in June compared with 11.6 per cent a year earlier and 16.6 percent in last May. This means that unemployment has increased by 36 per cent compared with the same period last year and fell by 3.5 per cent within a month.

In early summer, the unemployed in Greece were 793,685 people and economically inactive population - 4,385,584 people.

Yet another stern warning to the country to fulfill all obligations arising from the fact that it is a member of the euro zone now completed this gloomy picture of the Greek economy. The German Finance Minister Wolfgang Schäuble also stressed that the country will not receive a new economic aid if it does not comply with its obligations.

After pointing out that Germany is ready to provide aid to Greece and all other seriously indebted countries, the German Minister insisted that the euro zone member states should deal with the root causes that give rise to their problems. He described the situation in Greece as "serious" and repeated that if Athens does not receive the sixth tranche, the country will not be able to meet its obligations.

The pressure on Greece to apply new measures to fulfill its commitments is becoming more intense in recent days. The Prime Minister of the Netherlands announced that if the financial Troika considers that Greece has failed to fulfill its obligations for the financial reforms, his country will not involve in the next loan.

Yet the European Commission is satisfied with the new economic measures announced by the Greek government and states that the representatives of the supervisory Troika will return to Athens in the coming days to complete the negotiations about the payment of the sixth tranche.

The spokesman for EU Commissioner Olli Rehn said that the statements of the government prove that there was additional work that had to be done. He added that the representatives of the Troika would continue their work on assessing the progress after their return to Athens without specifying exactly when that would happen. It becomes clear from his statements that the Troika could return before mid-September, as soon as the Greek government obliges that it will make the necessary steps for the reforms, the privatization and the public finances, which include the budget for 2012.

The Eurogroup President Jean-Claude Juncker, however, said on his part in Sofia, where he is on a visit, that the payment of the next tranche of the aid to Greece should not be considered certain unless the country fulfills all its obligations.

A statement by Reuters, quoting euro sources from Brussels, says that Greece will have to cover with new equivalent measures the deviations from the objectives of the budget deficit this year and next year as well as the other reforms, which were agreed with the international creditors in order the next installment to be paid. A source presenting the German position states that if the report of the Troika is not positive they will not pay the sixth tranche.

However, the budget deficit is expected to be at least one GDP unit higher than the agreed 7.6 per cent and only a quarter of the deviation is due to the heavier-than-expected recession, states a source close to the Troika.

In this case, it would be impossible for Greece to satisfy the inspectors, unless it is prepared to offer other compensatory measures.

It is clear that it is not possible to cover the deviations in 2011, because there are only three months left. However, they should be covered with other measures of equivalent nature. The general objectives of the program can not be revised, states a source for Reuters.

 

Tags: PoliticsEconomyGDPDeclineRecessionUnemploymentTroikaInsepctorsReportCompetitivenessTrancheBailout
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