Stoil Topalov

Stock markets around the world continued their upward trend, with the Dow Jones leading the way with a 4.5% climb, closing at 7778 points on Friday. In Europe, the FTSE 100 rose about 0.2% and closed the week at 3906.7 points, with the German DAX also closing higher at 1.3%. The general index of the Athens stock exchange also registered important gains, closing at 1671.8 points, or roughly 1.4% higher for the week.

Even though stock markets have shown a slight recovery in the last couple of weeks, there’s plenty of bad news to fret about, especially in the eurozone. The European Commission (EC), in its overview of the eurozone economy, has put Greece, Ireland, France and Spain under surveillance, with strict recommendations  - most of which must be adhered to within six months, to achieve results by 2010.

For Greece, the EC recommendations are targeting a reduction of the budget deficit below 3% of GDP, cutting spending and fixing the ailing public sector - steps which will improve the “fiscal disarray” of the Greek economy, as the Financial Times put it. Other worrying factors are the growing government debt (which is almost 100% of GDP) and a worsening trade deficit. The tourism sector is also hurting - which can only be bad news for a country like Greece, where tourism revenue is one of the major income generators and drivers of the economy. Summer reservations are already down 20% from the same time last year, and about two thirds of greek hotels have opted to remain closed in april - which is the usual time for business to begin in a year when the orthodox Easter falls on such a late date (19th April). Those that have chosen to remain open have hiked their prices - reportedly 15% higher than 2008. Finally, the rate of credit expansion for business lending has fallen to 12.9% this month, from 14.6% in January and 23% in February 2008. Lending to individuals has also slowed to a 10.3% growth in February, against a 12% growth the previous month, and 22% growth over the same period last year.

The Greek economy’s growth prospects, however, are much better than those of most eurozone members, as the EC report stated, with GDP growth still expected at around 0.5%-1%. Outside the safety net of the eurozone, many of the newer EU members are seeing their frail currencies on the verge of collapse. Hungary, Latvia and Romania have already had to resort to IMF help. The economic crisis has also taken political victims - the Czech government, holding the rotating presidency of the EU, has collapsed after losing a vote of no-confidence. Tension has also risen between the EU and the USA ahead of the G20 summit in London - the main issues being protectionism and falling EU demand, causing US dissatisfaction over the way some EU governments are handling the crisis.