Greece remains in a deep recession

AP News
Posted: Aug 12, 2011 8:14 AM
Greece remains in a deep recession

Greece, which is set to receive its second multibillion bailout, remains mired in a deep economic recession as household finances remain pressured by deep austerity measures, official figures showed Friday.

The country's statistics agency said the economy contracted by 6.9 percent in the second quarter of 2011 compared to the same period last year, down on the 8.1 percent recorded in the first quarter.

The figures are not adjusted for seasonal factors.

The agency said a fall in domestic consumer spending and investment contributed to the contraction in the second quarter, though that was partially offset by an improvement in the country's trade position.

Analysts said the figures indicated the contraction of the economy was slowing, but potentially not fast enough to meet forecasts by the European Commission.

"We calculate that if the (second quarter) pace of contraction was sustained through the remainder of 2011, GDP for the full year would be on track to record a fall of near 5.5 percent," said Malcolm Barr of JP Morgan. "The July review of Greek program had seen the European Commission forecast a 3.8 percent fall. So as much as the pace of contraction is easing, it is not doing so quickly enough to deliver on the macro forecast at this point."

The figures come a day after the agency released jobless figures, showing unemployment levels reaching a new record of 16.6 percent in May.

Greece has been in the grip of a severe financial crisis since the end of 2009, and has relied on funds from bailout loans from EU countries and the International Monetary Fund since last May.

Last month, European leaders agreed on a second bailout worth euro109 billion ($155 billion), on top of the initial euro110 billion package of rescue loans.

In return, the government has introduced strict austerity measures, including cutting public sector pay and pensions and hiking taxes.