Figures from the European Commission’s Eurostat show that Greece slumped back into recession in the first three months of 2017.
Greece Back into Recession, Says European Commission
Greece’s slippery slope back into recession comes amid in-fighting between the government and its creditor over the bailout agreement.
In the first three months of 2017, the Greek economy shrank by0.1 percentage points after contracting by 1.2 percentage points in the last quarter of 2016.
Market observers had anticipated that the economy would grow by at least 0.2 percent in this first quarter.
This initial data shows that Greece fell into a technical recession, which occurs when following two consecutive quarters of economic decline. In Greece, this has happened for times in nine years.
This year, Athens lowered its growth expectations from 2.7 percent to 1.8 percent.
According to chief economist for Europe at Capital Economics, Jennifer McKeown, Greece’s slip back into recession in the first quarter was an indication of the adverse impact of stalled bail out talks. She added that the government’s new economic forecasts are too optimistic.
Ms. McKeown further said, “This will make it difficult to create a deal that will allow Greece to meet its debt repayment this summer.”
Today, the Greek economy has shrunk 27 percent from where it was before the financial crisis.
The Greek government revised its growth forecasts prior to a four-day debate in parliament on new austerity measures that would involve pension cuts in an effort to access the next bailout tranche worth £73bn.
According to estimates by Athens, the austerity measures will allow the country to raise €2.63bn by 2019 while expanding the tax base could raise €1.92bn by 2020.
Greek finance minister, Euclid Tsakalotos said debt relief talks would come following approval by the Greek parliament.
Mr. Tsakalotos further said that by the next Eurogroup meeting on May 22, there should be a final agreement with debt relief included.
On Thursday, Athens will vote on the proposal prior to the Eurozone finance ministers’ meeting.
Greece’s creditors are yet to agree over the amount of debt relief needed and budget targets that will bring Greece back on track.
International Monetary Fund managing director, Christine Lagarde met Greek Prime Minister, Alexis Tsipras over the weekend and discussed the need to continue implementing agreed reforms and support including debt relief measures, according to a spokesperson.
Ms McKeown said it was likely that politicians will trash a deal to provide funds to Greece to ensure it avoids a debt default this summer.