Greek economy posts decline for 20th quarter

Unemployed people stood in a long line outside an office of Labor Force Employment Organization in Athens last week. Joblessness in the country reached 27.6 percent in May.
Thanassis Stavrakis/Associated Press
Unemployed people stood in a long line outside an office of Labor Force Employment Organization in Athens last week. Joblessness in the country reached 27.6 percent in May.

PARIS — The Greek economy posted its 20th consecutive quarterly decline in the three months through June, government data showed Monday, but a slower pace of contraction provided a glimmer of hope for beleaguered Greeks.

Gross domestic product shrank by 4.6 percent in the second quarter from the same three months a year earlier, the official Hellenic Statistical Authority said. That was an improvement from the first quarter of 2013, when the economy contracted 5.6 percent from a year earlier.

The economy has been shrinking since the third quarter of 2008, when the collapse of Lehman Brothers rocked the global financial system, drying up credit to Greek businesses and consumers, exposing years of errors in government record-keeping, and driving the country to the brink of collapse.


The troika of international bodies that have been shoring up Greece’s finances and guiding its recovery — the International Monetary Fund, the European Central Bank, and the European Commission — have approved more than $320 billion in bailout loans since 2010, a sum larger than the country’s annual economic output. Most recently, in July, Greece received a loan installment of $7.8 billion after Parliament agreed to further increases in taxes and cuts in the public payroll.

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Ben May, an economist in London with Capital Economics, said the latest number was “encouraging, as it looks like the quarterly pace of decline is slowing.” An analysis of the second-quarter figure suggested that GDP might have ticked up by about one-tenth of a percent from the first quarter, he said.

“The troika’s forecast for a 4.2 percent annual decline in 2013 looks achievable,” May said. But it remains “plausible,” he said, that the Greek economy will continue shrinking into 2015. He forecast a 2 percent decline in GDP for next year, followed by a 0.5 percent contraction in 2015.

Many economists argue that the austerity approach favored by the troika is itself part of the problem, pushing Greek unemployment to depression levels. The jobless rate reached a new peak of 27.6 percent in May, according to the statistical agency, with youth unemployment around 65 percent.

Austerity has in practice largely meant laying off civil servants and cutting social spending, because raising taxes generates little revenue in a collapsing economy.


The policy is paying off in one respect: Deputy Finance Minister Christos Staikouras said Monday that the government had achieved a primary budget surplus of $3.5 billion, or 1.4 percent of GDP, in the first seven months of the year, significantly better than the expected primary deficit of $4.1 billion, Kathimerini, a Greek daily newspaper, reported on its website. A primary deficit or surplus excludes debt service and some other costs.

May said that it was almost certain that some kind of government debt restructuring would be needed to achieve what the troika calls a sustainability target: a debt-to-GDP ratio of 120 percent by 2020.