Greece sinks deeper into depression in third quarter

ATHENS Wed Nov 14, 2012 6:53pm IST

Women make transactions at automated teller machines (ATM) in Athens August 3, 2012. REUTERS/Yorgos Karahalis/Files

Women make transactions at automated teller machines (ATM) in Athens August 3, 2012.

Credit: Reuters/Yorgos Karahalis/Files

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ATHENS (Reuters) - Greece's economic slump deepened in the third quarter, with output shrinking 7.2 percent on an annual basis as the debt-laden country heads into its sixth year of depression and struggles to meet its bailout targets.

The contraction was deeper than the second quarter's 6.3 percent drop and follows the passage of a tough 2013 budget by Prime Minister Antonis Samaras's government that is expected to continue to smother growth for most of next year.

Since 2009, the Mediterranean state's economic decline - which Samaras has dubbed Greece's "Great Depression" - has wiped a fifth off economic output and sent unemployment to a record high, putting one in four Greeks out of work.

The reading could point to an even grimmer outlook, analysts said, because it was offset by better-than-expected returns from the country's vital tourism sector, which accounts for a fifth of Greece's 215 billion euro economy.

A new wave of wage and pension cuts and tax hikes agreed with the country's international lenders for 2013, coupled with a liquidity shortage, was expected to add to the economic misery, making recovery even more distant.

"The recession will continue to deepen until the first half of 2013, due to the implementation of all the cuts," said Xenophon Damalas, head of investment services at Marfin Egnatia bank in Athens.

"If we hadn't had such a good picture in tourism this year, the recession would have been deeper."

Greece's GDP for the quarter was 20 percent lower in real terms than output in the third quarter of 2008, when the downturn began. The estimate, released by statistics service ELSTAT, was based on seasonally unadjusted data. It gave no further details.

In its mid-term fiscal plan, the government said it expects the economy to shrink 6.5 percent in 2012 and 4.5 percent next year. It forecasts a slight recovery to begin at the end of 2013 and growth of 0.2 percent in 2014.

Spain is also in recession, and fellow austerity-hit Portugal's contraction deepened in the third quarter, with export growth slowing and domestic demand hit by an austerity programme imposed under the country's international bailout.

Portugal's economy shrank 3.4 percent year on year, National Statistics Institute INE said on Wednesday, accelerating from the previous quarter's revised 3.2 percent drop.

Millions of workers joined strikes across southern Europe on Wednesday to protest against austerity measures that labour unions say have brought misery and deepened the region's economic crisis.

With a peaceful three-hour work stoppage against austerity, Greek workers joined protesters in Italy, France, Belgium, Portugal and Spain, where labour unions held their first coordinated general strike as part of a "European Day of Action and Solidarity".

Greece's prolonged slide has undermined its ability to hit targets laid out in its bailout programme by undercutting budget revenues and feeding popular anger over belt-tightening.

The country of 11 million is awaiting the release of more than 30 billion euros in aid from its international lenders, the European Union and the International Monetary Fund, to pay off debt and shore up its banking sector.

But a public clash between the lenders over how Athens can bring its debts down to a sustainable level reignited fears that its and Europe's broader debt troubles could flare up anew.

(Reporting by Renee Maltezou and Lefteris Papadimas; Writing by Michael Winfrey; Editing by John Stonestreet)

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