ECONOMY

Alternate FinMin warns of deepening recession

Greece is facing a worse-than-expected recession, the new alternate finance minister warned on Tuesday as the debt-hit country prepared to bargain for easier terms on its EU-IMF loan bailout.

Christos Staikouras said the economy would contract by 6.7 percent in 2012 compared to previous forecasts of 4.5 percent, citing figures recently released by the state-run Centre of Planning and Economic Research (KEPE).

“The economic situation is critical,» Staikouras said in a speech at a conference organized by The Economist magazine.

According to KEPE data, the contraction hit 6.5 percent in the first quarter of 2012 on a 12-month basis and will soar to 9.1 percent in the third quarter.

In April the Bank of Greek forecast that GDP would contract by «about 5.0 percent» in 2012, a recession far deeper than the 3.0 percent previously forecast. Greece shrank by 6.9 percent in 2011.

The Greek economy is now in the fifth year of a recession that began with the financial crisis of 2008 and turned worse in 2010 with the eurozone debt crisis.

The poor outlook by the incoming government comes as IMF and EU auditors arrived in Athens to audit government finances and progress on bailout conditions.

The audit comes as Greece’s new conservative government takes the full reins of power after winning elections on June 17. [AFP]