ECONOMY

December sentiments fall on back of uncertainties

Greek consumers and businesses felt less confident in December, echoing concerns felt across Europe over the deteriorating global economic outlook and uncertainties over a possible war in Iraq. The Greek industrial confidence indicator last month fell by 4 percentage points to 1, a survey by the European Commission showed yesterday, in contrast with a 2 percentage point rise in the eurozone. Greek consumer sentiments were just as jittery, with the index worsening by 2 percentage points. Since the stock market bubble burst in 1999, consumer confidence has taken a downhill course. Across Europe, consumer confidence has taken a battering as Europeans worry about rising unemployment, an economic slowdown and US-led military action against Iraq. The eurozone indicator dropped by 2 points to minus 16, the lowest level in five-and-a-half years. The strong euro is also weighing on business and economic sentiments, said Platon Monokroussos, EFG Eurobank economist. Last year, the single currency gained 15 percent against the dollar, in part prompting the European Central Bank to trim rates on December 5. Pedro Solbes, EU monetary commissioner, last month warned of the dangers of a strong euro, saying it could erode exporters’ profit margins, chip away at their market share and hamper the region’s export growth. On the plus side, analysts said the rising euro could force reforms in labor markets, helping to boost competitiveness and productivity. The euro fell yesterday after Brussels came out with its data showing the drop in eurozone consumer confidence. «The fact that some eurozone countries have violated the Stability and Growth Pact is not encouraging to consumers,» said Monokroussos. Germany, Portugal, France and Italy last year breached or came close to breaching the 3 percent deficit/GDP ceiling. Despite the deterioration in Greek consumer and business sentiments last month, the Greek indices, with the exception of the consumer indicator, continued to surpass the eurozone averages in absolute numbers, Monokroussos said. «Overall sentiments in Greece are better than across the region,» he said. One reason for the general feel-good mood is Greece’s projected above-average growth in the next four years. The economy is expected to expand by 3.8 percent this year, against an anemic 1.6 percent for the eurozone. A war against Iraq, however, could push this down to 3.1 percent. Greece’s stability and growth pact projects growth averaging out at 3.8 percent to 2006. EU community funds – 21 billion euros over the 2000-2006 period – and infrastructure projects related to the 2004 Olympic Games are also expected to fuel growth in the coming years.