ECONOMY

Greek 7-year slump seen by OECD testing limit of bailout aid

Greece may need additional funds under its bailout program from the European Union and International Monetary Fund as output drops for a seventh year in 2014, the Organization for Economic Cooperation and Development said.

Gross domestic product will decline 1.2 percent next year, after falling 4.8 percent in 2013, the Paris-based OECD said in a report on Wednesday. The drop in 2014 output is smaller than the OECD’s 1.3 percent forecast in its last report in November. The European Commission forecasts Greece will return to growth next year with a 0.6 percent expansion in output.

“Given the depth of the recession and social tension, the automatic stabilizers should indeed be allowed to operate if economic activity proves even weaker than anticipated by the program,” the OECD said. “Without market access this might imply additional official financing or debt relief.”

Greece is in the sixth year of a recession that has been exacerbated by austerity measures tied to the country’s 240 billion-euro bailout packages. The nation’s unemployment rate is at 27 percent, with more than six in 10 young people out of work.

Unemployment will reach 28.4 percent next year, while consumer prices will drop 0.7 percent this year and 1.7 percent in 2014, according to the OECD. Public debt will rise to 180.6 percent of GDP next year from 175.1 percent this year, the organization said.

[Bloomberg]