The European Commission expects the recession that returned to Greece this year to continue into 2016 and is calling on the government to immediately draw up additional measures for 2017. Along with the release of its fall forecasts on Thursday, Brussels also criticized Athens for reversing the positive momentum recorded in the economy last year, which is attributed to the renewed uncertainty during 2015 and the introduction of capital controls.
The Commission expects the Greek economy to contract 1.4 percent this year and 1.3 percent in 2016, before rebounding by 2.7 percent in 2017.
It blamed the loss of the 2014 momentum on the uncertainty created by the unsuccessful completion of the second bailout program, the referendum called by Prime Minister Alexis Tsipras in July, the three-week bank holiday and the capital controls, which came into effect on June 28.
Despite the above constraints, the Greek economy expanded 1 percent in the first half of the year, although this was due to the rise in consumption as Greeks feared for their incomes and savings. It further reflected the decline in imports, while the very positive course of tourism for a second year in a row also helped.
In the current second half of the year, Brussels believes that the Greek economy is burdened by the great volume of tax obligations that have to be paid out by the end of the year, the wait-and-see attitude of investors and the lack of credibility in the economy.
The Commission hopes that the stabilization of the credit sector after a successful recapitalization, the recovery of confidence and the return of investors through the privatizations program could lead the economy back to growth in the latter half of next year. It stressed that the application of the agreed reforms is key to a Greek recovery.
Regarding the necessary primary budget surplus, the Commission says that besides the measures for 2015-17 already taken, amounting to 4 percent of gross domestic product, the government should take extra measures adding up to another 1.75 percent of GDP for 2017.