EU Commission Forecasts Extend Greece Recession to 2017

The European Commission sees Greece’s economy returning to recession in 2015 and the following year, with growth only materialising in 2017, and urged the Greek government to comply fully with the terms of the third lending agreement in order to restore economic confidence.

According to finance news MNI.com, in its Autumn Forecast report, published Thursday in Brussels, the Commission said Greece’s GDP will contract by -1.4% in 2015, -1.3% in 2016 and will return to growth of 2.7% in 2017 if the government implements fully the agreed reforms and measures of the third bailout deal singed in August. In its Spring 2015 forecasts, published in April, the Commission had predicted growth rates of 0.5% in 2015 and 2.9% in 2016.

“The Greek economy built up positive momentum in 2014. However, the unsuccessful conclusion of the 2nd Adjustment Programme, the referendum called in June 2015, the ensuing bank holiday and the introduction of capital controls raised uncertainty and deteriorated the growth outlook,” the Commission said.

Greece’s debt, according to the Autumn forecasts, will climb to 194.8% of GDP in 2015, and to 199.7% in 2016 before decline slightly to 195.6% in 2017.

The debt figures were revised significantly upwards when compared to the Spring report, where the Commission predicted debt-to-GDP ratios of 180.2% in 2015 and 173.5% of GDP in 2016.

“The prolonged uncertainty and the turnaround in the economic cycle also had a negative impact on public finances in the first half of 2015, especially recapitalisation envelope of up to E25 billion (14% of GDP) envisaged in the ESM programme has been included into the public debt figures starting in 2015, although it remains to be seen if all funds need to be drawn,” the report said.

The report also said that Greece’s third bailout agreement and the measures partly implemented in July and August brought significant fiscal consolidation that would get Greece a small primary deficit of -0.25% of GDP in 2015 which will switch to a primary surplus of +0.5% of GDP.

“Moreover, the Greek government has committed to legislating in autumn 2015 an additional fiscal package to ensure a primary surplus of 1.75% of GDP in 2017. Based on this primary balance path, the headline deficit is projected to fall from -4.6% of GDP in 2015 to -2.2% of GDP in 2017,” the report said. (full report in mni.com)

If I am not wrong PM Tsipras recently predicted the return to growth at the end of first half of 2016. Or something like that. Or the end of capital controls. Or all together. But doesn’t matter. EU’s predictions in terms of creditors’ power are certainly much stronger.

PS by 2017 the 2 euros in my wallet right now will be long gone and used. In fact, they won’t make to Christmas. End of month. Next week. Saturday morning.