Austerity delays exacerbating Greek recession

The extended wait for the latest package of austerity measures, which has lasted from the formation of the coalition government in June to date, has had a clear negative impact on the broader economy as it has put a damper on the post-election euphoria and has seen consumers revert to a pessimistic mood, a survey has found.

The September data in the monthly economic climate survey by the Foundation for Economic and Industrial Research (IOBE), released on Thursday, showed the economic climate index at 76.1 points, the same level as in the previous survey in July.

Worse, consumer confidence in Greece has declined significantly owing to the negative expectations for household finances and to a lesser extent for the fiscal situation, while hopes of boosting bank savings in the next 12 months appear smaller than in July. Furthermore, the improvement in forecasts regarding the unemployment rate in July proved temporary, giving way to a fresh and intense deterioration in September, the IOBE survey data showed.

The improvement in business expectations for industry and services in September was offset by a deterioration in the construction and in retail commerce sectors, as well as a drop in consumer confidence, the foundation estimates.

In the same vein, Alpha Bank said in a report published on Thursday that Greece?s international creditors — the European Commission, the European Central Bank and the International Monetary Fund, collectively known as the troika — are ?putting Greece through a stress test? by delaying their verdict on the progress of the Greek economy and the disbursement of the tranche of 31.5 billion euros.

Alpha adds in its report that the delay is unjustified as the budget execution has clearly improved and the government has stated its intention to pass austerity measures worth some 13.5 billion euros. It concludes that the country has been pushed to a situation that is strongly reminiscent of October 2011 — which brought about the crumbling of the George Papandreou government — and is certainly leading to an even deeper recession.

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