More cost-cutting efforts may boost sentiment

Bank of Greece, the country’s central bank, called on the government to step up cost-cutting efforts and produce a larger-than-expected reduction in the deficit next year in a move it says would help restore plunging economic sentiment. Central bank Governor Giorgos Provopoulos said in an annual report that the government needs to reduce the deficit next year by more than 5 percent, rather than the 4 percent cut it has announced, if it wants to «positively surprise investors.» «In order to reverse the negative trends, we need to exceed ourselves,» he said. Last week, a revision of Greece’s 2009 deficit figure by European statistics agency Eurostat resulted in the shortfall rising to 13.6 percent of gross domestic product, from 12.7 percent previously. Despite the rise, Greece says it will stick to current fiscal plans on the grounds that recent austerity measures could slash the shortfall by up to 6 percent next year. Given current budget numbers, the country’s public debt will rise in 2014 to at least 130 percent of GDP, versus 115 percent in 2009, Provopoulos said. Greece said last week it wants to activate a joint European Union and International Monetary Fund mechanism worth up to 45 billion euros. However, investors remain concerned about the country’s ability to meet its debt requirements in jitters that have spilled over into the equity market. Bank stocks plummeted yesterday, falling 9.2 percent. National Bank slumped 10 percent to 10 euros and peer Alpha gave up 11.96 percent to 5.30 euros. The broader market slumped 6 percent, bringing losses in the last week to over 8 percent. On the growth and labor market front, Provopoulos predicted worsening conditions after the economy contracted by 2 percent last year due to lower investment and private consumption. Annual economic output is likely to show a negative growth rate of more than 2 percent this year, said the central bank governor, who added that the recession could deepen. «Under current conditions, the forecast is subject to a large degree of uncertainty, while probabilities are strong that there could be a larger drop-off,» he said. Greek labor market conditions are likely to keep deteriorating, with the unemployment rate seen approaching 11 percent, versus 9.5 percent last year, he added. [email protected]

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.