WITH its economy strangled, Greece saw its deficit grow more last year than originally forecast – up to 9.4 per cent of output in 2011 against an earlier estimate of 9.1 per cent. The economy is now forecast to shrink by 4.5 per cent in 2013, not 4.2 per cent as thought before. And the decline is accelerating. Output fell by 7.2 per cent in the third quarter of 2012 compared with the same period in 2011, greater than the 6.3 per cent decline registered for the second quarter of 2012 (again, compared with 2011). Government borrowing is expected to rise from 4.2 per cent to 5.2 per cent of GDP, with a total debt of 189 per cent of annual output, up from 179 per cent.
The Greek economy has shrunk by 22 per cent since 2008. The 2013 rise in government spending will be wholly due to the increased interest payments on existing debt. Germany has confirmed its opposition to the write off of any debts and says that Greece must accept further measures if it wants to stay in the euro. The next round of cuts, the EU’s price for a further loan of 31.5 billion euros (£25.3 billion) and an extension of deficit-reducing targets, amounts to 13.5 billion euros, with more privatisation of public services, increasing the retirement age, further cuts to pensions, salary cuts for public sector workers and cuts in notice periods for redundancies and redundancy pay.
Prime Minister Samaris, while admitting the cuts were “unfair”, promised they would be the “very last”, something Greeks have heard before. Syriza, the left parliamentary coalition, warned that Greeks will not be able to afford necessities this winter. Cracks are appearing in the government, with one of the governing coalition partners, the Democratic Left, refusing to support the new measures and many PASOK (Panhellenic Socialist Movement) MPs also rebelling. The imposed measures eventually scraped through with a majority of just three while tens of thousands protested outside the parliament building.
There were also rallies across Greece. A 48-hour general strike affected both the private and public sectors. Transport systems were shut down in advance, including trains, ferries and international flights, with schools shut and hospitals only open for emergencies.
Greece has to negotiate for emergency funds from money markets should there be problems with the EU loans – thus driving the country even further into debt. Cyprus, already reduced to junk credit status and with its close links to Greece, is also discussing a further bailout from the EU. ■