Unrest returns as Greece lurches back into recession

Greece entered a recession in the fourth quarter of 2015, ending a turbulent year with its economy back in the doldrums.
Unrest returns as Greece lurches back into recession

The country’s GDP contracted 0.6% in the three months through December after shrinking a revised 1.4% in the previous quarter, the Hellenic Statistical Authority said yesterday.

The median estimate in a Bloomberg survey was for a 0.8% drop. Greece began one of the most traumatic periods in its modern economic history with the election, a little more than a year ago, of an anti-austerity government committed to tearing up the country’s bailout agreements.

That ended with a dramatic U-turn by prime minister Alexis Tsipras and a third bailout in August.

With opposition mounting to the government’s pension reform plan, the EU pressuring it to stem the influx of refugees, and the global market rout hastening the sell-off in Greek assets, dark clouds are gathering again. There were minor scuffles in Athens yesterday as farmers took to the streets to protest the pension overhaul.

“We need some symbolic and real measures to boost confidence that the government has ownership of the reforms,” said Tassos Anastasatos, an economist at Eurobank Ergasias in Athens.

“We expect weakness of domestic demand in the entire of 2016, and it remains to be seen to what extent that can be counterbalanced by exports and investments.”

The country will face renewed euro-exit fears unless its government and European creditors come up with a credible plan to make the country’s debt sustainable, Poul Thomsen, head of the IMF’s European Department wrote in a blog post.

The fourth-quarter data show the Greek economy contracted 0.7% over the whole year, according to Bloomberg calculations, reversing a nascent recovery after growth in 2014 ended a six-year slump.

The August bailout agreement forecast GDP would shrink 2.3% in 2015. The economy fared less badly than those initial expectations in part due to a 90% annualised increase in cashless payments since the introduction of capital controls in June. The European Commission forecasts Greek GDP will contract 0.7% in 2016 before growing 2.7% next year, according to its winter economic forecasts.

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