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EU Commission: Recession in Greece Deeper “Than We Thought! *Sorry for the Incovencience*”

This must be a joke. A bad joke. In fact, a very bad joke. Recession in Greece will lead within the EU with a massive 4.4 percent decline is the prediction of the EU Commission for 2012. This grim forecast comes just a few days after the new bailout was signed with the blessing of all Greece’s lenders. Also Spain and Portugal, that received bailout as well, will not see growth coming, but deeper recession.

“”Greece’s economy is seen contracting at an annual pace of 4.3% in 2012, versus a previous forecast for a downturn of 2.8%, the European Commission said Thursday. In an interim report, the Commission said it sees substantial downside risks to Greece’s economy mirrored by very low consumer and business confidence.

“Apart from the weakening external demand, domestic demand is set to contract given the expected acceleration of the labor market adjustment, with wage cuts in the private sector,” it said.

Exports are set to be less dynamic than in previous years, it added, while imports will continue to be hit by weak domestic demand, helping the external sector make a positive contribution to the economy.

“In 2012 the price rise trend is expected to be reversed, resulting in slight deflation of 0.5%. The main driving force stems from anticipated falls in disposable income and consumer spending due to wage cuts in the private sector,” the report said according to Dow Jones via NASDAQ“”

Aha! So the previous forecasts were wrong? All the 17 members of the eurozone will suffer a modest recession this year, European Commissioner for Economic and Monetary Affairs Olli Rehn revealed on Thursday adding “Although growth has stalled, we are seeing signs of stabilisation in the European economy” and that “Economic sentiment is still at low levels.” At the same time he stressed that “stress in financial markets is easing.”


Rehn: “Greece’s growth is over there, at the back seats…

“In its latest projections, the European Commission forecast a 0.3 percent contraction in the eurozone economy, with Greece leading the way downwards with a massive 4.4 percent decline.

That would be the fifth straight year of recession in Greece, which earlier this week clinched its second massive bailout package in less than two years.

In its last forecast in November, the Commission predicted a 0.5 percent expansion across the eurozone economy following last year’s 1.4 percent growth. The difference this time is that it now expects the economies of Belgium, Spain, Italy, Cyprus, the Netherlands and Slovenia to contract in 2012, not just Greece and Portugal.

The overall decline is limited by resilient activity in Germany and France, the eurozone’s two-largest economies. Growth in Germany is penciled in at 0.6 percent while France is forecast to grow by 0.4 percent. “”(Full article on further EU countries Associated Press)

 “The EU and IMF’s latest draft report on Greece indicates that the economy will contract more in 2012 than the 3 per cent the IMF forecast in a December report.” (Irish Times)

So I have to ask: Who does all these bailout agreements based on false predictions and wrong data?

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One comment

  1. Shouldn’t the question rather be, where do the false predictions and wrong data come from? In this context, it is quite ridiculous that the Greek parliament wants to start an investigation into the 2009 data of the Greek statistic agency, because it was overly PESSIMISTIC! Hehehe, what clowns.

    But back to topic: Regarding that the troika conditions were basically the same for all struggling nations, how can it be that Greece fared worst of all (with the exception of the Irish, maybe, but they had trouble with their overblown financial sector on a huge scale)? Face it, other governments managed to stabilize their GDP at a quite higher level, while in Greece it is in freefall all of the time. Sure, maybe the EU/IMF is asking for too much too fast, and doesn’t care enough about the consequences on domestic demand, but it can’t be seriously denied that the mess in Hellas is largely to be blamed on the horrible conditions of the Greece politcal, administrative and economic system in the first place. There are probably no other governments in Europe which delayed urgent and necessary reforms for so long as the Greek ones.

    Now that the truth about the myriad of problems comes to light, step by step, it’s not very much of a surprise that all the preditions have become moot. And some of the most urgent problems, like corruption, haven’t even been adressed yet. Under these conditions, it will take several years before the nation is back on a solid, sustainable growth path again. But what is the alternative, really? More of the same old mess? You won’t find anybody to subsidize this. So, all efforts have to go into making the reforms a success. Instead of shouting Ohi, people, especially party and union leaders, should come up with constructive ideas for changes that are fair and socially acceptable. It’s the absence of better plans that makes the troika proposals so inevitable. And, indeed, it would be good if that would change.