Economic slump surprisingly bad

Greece?s economy contracted by a larger-than-expected annual pace of 6.6 percent in the last three months of 2010, with the recessionary blues expected to continue this year, pushing jobless rates further higher.

?The significant reduction in consumer spending contributed to the drop in gross domestic product (GDP), while the improvement of the trade deficit partly offset the negative result,? the Hellenic Statistical Authority (ELSTAT) said on Tuesday.

Economists expected the economy, that has been shrinking for 10 consecutive quarters, to contract by 4.8 percent in the last quarter of 2010, according to a Reuters poll.

On a quarter-on-quarter basis, Greece?s 230-billion-euro economy shrank by 1.4 percent, ELSTAT added.

Government austerity measures introduced last year in exchange for a 110-billion-euro EU-IMF rescue plan aimed at saving the country from bankruptcy have pushed the economy deeper into recession than the government had expected.

Flash estimates from Eurostat, the European Commission?s statistics service, on Tuesday showed the downturn in economic activity for 2010 was 4.52 percent, worse than the Greek government’s forecast decline of 4.2 percent.

The Bank of Greece, which sees the economy contracting by at least 3 percent this year, called on the government on Tuesday to push ahead with reforms as a way of bringing the country back onto a growth path.

?The faster and better structural reforms are introduced, the sooner there will be a return to growth,? said the Bank of Greece in its annual monetary report.

Necessary reforms singled out by the bank include cutting budget deficits, deregulation of the labor market, upgrading education, simplifying business start-up procedures and boosting competitiveness.

Representatives of the European Commission, European Central Bank and International Monetary Fund — known collectively as the troika — said last week that Greece?s reform program was at a ?critical juncture? and that a ?decisive breakthrough in the following weeks and months will be crucial.?

Regarding the severely hit labor market, the Bank of Greece added that it sees unemployment as averaging out at above 12.5 percent in 2010 with ?the expected trend for 2011 remaining clearly upward.?

The latest data shows that unemployment jumped to 13.9 percent in November from 10.6 percent in the same period a year earlier.

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