ECONOMY

IOBE warns contraction may be higher than forecast

The Greek economy may well contract by more than 4.6 percent this year and unemployment will climb to 27.6 percent, while the government’s talks with its international creditors do not seem to be bringing the results the country needs, according to estimates published on Monday by the Athens-based Foundation for Economic and Industrial Research (IOBE).

Angelos Tsakanikas, research director at IOBE, estimates that the economic contraction in 2013 may be greater than the 4.6 percent level seen in the previous set of forecasts by the foundation, ranging between 4.8 percent and 5 percent.

He noted, however, that this is a small difference when one considers the slide in the country’s output since 2007, which stands at 23.3 percent. IOBE also expects zero inflation for this year.

IOBE Vice Chairman Raphael Moisis stated that the economic policy followed appears to focus only on the “strategy for the installment” rather than any strategy for the country’s development.

He added that the halt in the government’s negotiations with the creditors’ representatives reveals that the country has not fulfilled its obligations.

He went on to warn of the risk of the Greek economy returning to a state of uncertainty, which would weigh heavily on corporate and consumer confidence, and identified unemployment as the biggest problem that must be dealt with immediately. That will only happen “if we attract new investments” he said, but that will not be easy when “our mentality, our statements and our systems insist in every possible way on driving them away.”

Moisis also warned of a possible expansion of Cyprus’s problems to Greece, which would have “more serious and long-lasting consequences in Greece than they have on Cyprus,” although he added that IOBE does not have a definitive estimate on the size of the impact of the Cypriot crisis on the Greek economy.