In Brief
Recession deepens in second quarter Greece’s debt-laden economy probably shrank 1 percent in the second quarter on a quarterly basis, the same contraction as in the first quarter, as austerity measures to slash its budget deficit aggravated the recession, a Reuters poll shows. On an annual basis, gross domestic product (GDP) fell 3.3 percent from a year earlier, accelerating from a 2.5 percent decline in the first three months of the year, according to the poll of 10 economists. As the fallout from Greece’s debt problems has hurt investor confidence in the eurozone, Athens is scrambling to shore up its public finances and attain fiscal targets agreed to with the European Union and the International Monetary Fund in exchange for 110 billion euros ($144 billion) in emergency funding. Athens aims to slash the budget deficit to 8.1 percent of GDP this year from 13.6 percent in 2009, hoping to convince markets it is dealing effectively with its fiscal crisis. However, cuts in pensions and public sector pay, coupled with tax increases and reduced investment spending by the government, have aggravated the country’s economic downturn, which is now in its second year. «Domestic demand is on a downward path, as increased indirect taxes, wage cuts in the public sector, high uncertainty and rising inflation take a toll on household disposable income, discouraging spending decisions,» said Nikos Magginas, economist at National Bank of Greece. He expects the slump in construction and business spending to continue at roughly the same pace over the next two quarters, dragged down by weak sentiment. GDP figures are due to be released today. (Reuters) Hungary confident about refinancing debt alone Hungary’s government is confident the nation will be able to refinance maturing debt in the next two years, said Laszlo Andras Borbely, the debt management agency’s deputy chief executive. Gross redemption, including maturities of one year and longer and tranches of the country’s international bailout, will amount to 2.15 trillion forint ($10 billion) in 2011, compared with 1.66 trillion forint in 2010, according to data from the debt agency known as AKK. That includes the repayment of 2 billion euros ($2.6 billion) to the European Union. Gross redemption will increase to 2.3 trillion forint in 2012. Hungary is working to wean itself off an international bailout and finance the economy from the market. The government obtained a 20-billion-euro emergency loan from the International Monetary Fund, the EU and World Bank in 2008 after the financial crisis halted demand for its debt. «I see no problems with refinancing due in 2011 and 2012,» Borbely said in a telephone interview yesterday. «The structure of the financing will be determined by developments in domestic savings and the central bank’s reserves policy.» Hungary wants to «restore its economic self-rule,» Prime Minister Viktor Orban said on July 22. (Bloomberg) Phone packages Greece’s telephone regulator approved four new combined Internet and phone access packages to be offered by Hellenic Telecommunications Organization SA. A fifth package wasn’t approved, according to a statement posted on the website of the Athens-based Hellenic Telecommunications and Posts Commission. The regulator last week ordered Greece’s former telephone monopoly to stop offering the packages following complaints from rivals, and because they were pending approval. The action is «positive overall but the relationship with the regulator remains tense,» HSBC Pantelakis Securities wrote in an e-mailed note yesterday. (Bloomberg) Romanian inflation Inflation in Romania rose in July to 7.14 percent on a 12-month basis, compared to 4.38 percent in June, driven by a value-added tax rise from July 1, official data showed yesterday. On a monthly basis, prices increased by 2.58 percent. Non-food prices rose by 3.08 percent in July compared to June, while food prices climbed by 1.92 percent. Services went up by 2.55 percent. (AFP)