War, slew of uncertainties eroding Greek optimism

Greek consumerand business confidence took a knock last month, suggesting that the war drums over Iraq, coming on top of a slew of global and economic uncertainties, are eroding optimism. The Greek consumer confidence indicator in January fell by four points, while the industrial confidence index declined by two points, a European Union survey of economic sentiments in the euro area and the EU released yesterday showed. European consumers in general shared the widespread gloom, with the index of consumer sentiments in the eurozone falling by one point to minus 17. Business confidence dropped to minus 10 from minus 9. The decline in consumer and business confidence underscored the «general mood of pessimism in Greece,» said Christos Avramides, head of analysis at Proton Investment Bank. «People are worried over what will happen after the 2004 Olympic Games and after 2006 when structural funds run out,» he said. In recent months, the government has sought to calm such fears by stressing that community-funded projects will lay the foundation for future growth. Theodoros Karatzas, head of the country’s largest bank, last month said the country can count on its telecommunications, energy and shipping sectors to sustain growth once Brussels turns off the tap. The prolonged bear run on the stock market is also dampening consumer sentiments. The market lost close to 4 percent of its value last month against a 32 percent slide in 2002, the third consecutive year of decline. Yesterday it made a partial rebound as investors went for blue chips. «Stock markets all over the world are seeing a lot of volatility now,» said Avramides. Weak valuations in turn have pushed investors toward the safe haven of gold, with prices rising sharply in recent weeks. Avramides said the slump in business confidence is understandable as, with the exception of the construction sector, the spillover from Olympic Games projects has been marginal. Manufacturing production in the first 11 months of 2002 was up by an anemic 0.1 percent, according to the National Statistics Service, as companies put their investments on hold and waited for the general air of uncertainty to clear up. Businesses won’t make any plans until the possibility of war in Iraq is cleared up, Avramides said. Paul Mylonas, an economist at National Bank, said there is still room for optimism. «Greek consumer confidence remains significantly above the eurozone level even with the decline in January, underlining the country’s above-average growth rate,» he said. Greece is targeting 3.8 percent growth this year against 1.5 percent for the eurozone.