Dark cloud over growth

The Greek economy, the most rapidly expanding economy in the eurozone, is entering a slowdown phase, as the first such signs since August are showing, according to the latest report by the Organization for Economic Cooperation and Development (OECD). The international organization forecasts a slowdown over the next six months, suggesting the economy’s growth was fairly fragile up to July 2007. By then, it had showed a small improvement but this was not sustainable for more than one or two months. Eventually, from August 2007, it started slowing down and in December it reached its worst level as compared to 12 months earlier. This fiscal deterioration in Greece coincides with the peak of the subprime mortgage crisis in the USA, the now globalized uncertainty and the rise in the cost of money, which began on the banking market. Now the rise in the cost of money has evidently begun to affect households and enterprises as well. The OECD index for Greece in December 2007 fell to 96.24 points, a decline of 2.67 percent year-on-year, while the respective drop in the USA was only 1.8 percent. The rapid slowdown in Greece emerged in October, when the OECD index declined for the first time since 2006 by 1.55 percent. A greater decline followed in November, by 2.30 percent, with December registering a 2.67 percent drop. What is more worrying for Greece is that its OECD index has stayed below the 100-point level and is dipping further. The Foundation for Economic and Industrial Research (IOBE) said that in January its economic climate index declined for the fourth consecutive month, recording the worst performance of the last 12 months. It fell to 100.6 points, from 104.3 points in December 2007. The main reason for this decline is the strong slump in consumer confidence. By contrast, in the business sector there is a marginal improvement, but that is not enough to offset the strong influence of the pessimistic estimates of consumers.