Outlooks on Greece deteriorating
Greece’s economy has the largest structural problems in the eurozone, according to Credit Suisse, while Merrill Lynch lowered its estimate for the country’s economic growth this year. Credit Suisse analysts point out that Greece’s low level of competitiveness is reflected in its high current account deficit, adding that the country’s growing debt is nearly out of control. Greece has the second-highest public debt in the eurozone, after Italy. Another area of concern is that 27 percent of Greek exports go to Eastern Europe, where forecasts are particularly grim. Meanwhile, Merrill Lynch cut its forecast for Greece’s growth rate this year, now expecting the economy to tip into a recession. Merrill Lynch, which had previously expected the Greek economy to expand by an annual pace of 1.4 percent this year, now sees it shrinking by 0.4 percent before rebounding with a positive growth rate of 0.7 percent in 2010. The forecast figures are well short of the Greek government’s optimistic figures, which predict the economy to expand by 1.1 percent in 2009. The global economy is also seen as shrinking by 0.4 percent, Merrill Lynch added, which tipped the eurozone to contract by 3.1 percent year-on-year. The investment bank also reduced its price targets for several leading Greek banks. It reduced its price target for Alpha Bank and Piraeus Bank to 4 and 3.90 euros, respectively. Both stocks had been previously set a 5.20-euro price target. Shares in Greek banks have tumbled recently, falling 74 percent in the last six months, on concerns that deteriorating economic conditions in Greece and Southeast Europe will harm their fundamentals. Merrill Lynch points out that «there are not many reasons to be optimistic,» adding that shares in Alpha Bank, Eurobank and Piraeus Bank are expected to underperform the broader market. It was more upbeat about National, the country’s largest lender, on which it has placed a neutral rating.