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Greece recession will deepen, says Antonis Samaras | |
(about 6 hours later) | |
Greece will suffer a much deeper recession than thought this year, Prime Minister Antonis Samaras has said. | |
He expects the economy to shrink by 7%, greater than the 5% forecast by the crisis-hit country's central bank. | |
Representatives of Greece's three international lenders are due to arrive in Athens later to get its deficit cutting measures "back on track". | |
Without sufficient progress, it may not receive the final part of its bailout worth 31.5bn euros ($38bn; £24.5bn). | |
Assistance for Greece totalling 130bn euros was agreed in March, its second major rescue package, with strict conditions attached that force Greece to cut debt and spending. | |
A deeper recession will not help Athens improve its performance, as it is already behind in its austerity plans because its economy is shrinking faster than forecast. | |
Mr Samaras said the country, which has been in recession for five years, would not return to growth until 2014. | |
He is expected to ask for more time to repay its loans. | |
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full | |
The Bank of Greece had been expecting GDP to shrink 5% this year, which would have been its deepest recession since the 1930s. | |
Economists calculate that Greece may need a third rescue package worth up to 50bn euros. | |
Greece's performance is being assessed by the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission, who together have been dubbed the troika. | |
The IMF said it was "supporting Greece in overcoming its economic difficulties" and would work with the country to get it "back on track". | The IMF said it was "supporting Greece in overcoming its economic difficulties" and would work with the country to get it "back on track". |
However, reports over the weekend suggested that the IMF would refuse calls for further aid. | However, reports over the weekend suggested that the IMF would refuse calls for further aid. |
New visitor | |
Meanwhile Greece is expecting another high-profile visitor this week. | |
The European Commission president, Jose Manuel Barroso, is planning his first visit to the country since 2009. | |
"The purpose of the meeting is to meet Mr Samaras and discuss the overall economic situation in Europe and in particular in Greece," Mr Barroso's spokesman said. | |
He said it was "a regular meeting" and that the preparation for the talks had been "under discussion for some time". | |
Greece has promised to reduce its budget deficit to below 3% of annual national income as measured in Gross Domestic Product (GDP) by the end of 2014. At the end of last year, Greece's overspend was equivalent to 9% of GDP in 2011. | Greece has promised to reduce its budget deficit to below 3% of annual national income as measured in Gross Domestic Product (GDP) by the end of 2014. At the end of last year, Greece's overspend was equivalent to 9% of GDP in 2011. |
Successive Greek governments have managed to trim 17bn euros from government spending. That has brought the country's total debt down from more than 160% of GDP to 132% according to official figures released on Monday. | Successive Greek governments have managed to trim 17bn euros from government spending. That has brought the country's total debt down from more than 160% of GDP to 132% according to official figures released on Monday. |
Under the terms of its international loan agreement with the troika, Greece has vowed to reduce its total debt to 120% of GDP by 2020. | Under the terms of its international loan agreement with the troika, Greece has vowed to reduce its total debt to 120% of GDP by 2020. |
But, Prime Minister Antonis Samaras would have had to have raised another 12bn euros through higher taxes and the sale of public assets such as the country's loss-making railways to have met this bailout target. | But, Prime Minister Antonis Samaras would have had to have raised another 12bn euros through higher taxes and the sale of public assets such as the country's loss-making railways to have met this bailout target. |
August debt payment | August debt payment |
The re-run of general elections and political instability as parties scrambled to form a governing coalition has delayed work by the troika and the government to agree a credible plan to restore the nation's finances. | The re-run of general elections and political instability as parties scrambled to form a governing coalition has delayed work by the troika and the government to agree a credible plan to restore the nation's finances. |
On Monday, a European Commission spokesman said the troika would not be in a position to report its findings and release the final 31.5bn euro instalment of bailout money until September. | |
"The Commission is confident that the decision on the next disbursement will be taken in the near future, although it is unlikely to happen before September," he said. | "The Commission is confident that the decision on the next disbursement will be taken in the near future, although it is unlikely to happen before September," he said. |
That leaves Greece in a difficult situation. A 3.8bn euro debt repayment to the ECB falls due on 20 August. Without the troika money, the ECB may be forced to step in to provide temporary aid. | That leaves Greece in a difficult situation. A 3.8bn euro debt repayment to the ECB falls due on 20 August. Without the troika money, the ECB may be forced to step in to provide temporary aid. |
But further debt repayments are due in September so failure to secure the bailout money could push Greece to the brink of insolvency. | But further debt repayments are due in September so failure to secure the bailout money could push Greece to the brink of insolvency. |
If Greece were to default on its outstanding loans that, in turn, could force it to exit the eurozone and return to the drachma. | If Greece were to default on its outstanding loans that, in turn, could force it to exit the eurozone and return to the drachma. |