Data shows Greece close to emerging from recession

A shop owner looks at tourists walking by his shop in Athens. The Greek economy, in recession for six years, shrank again in the second quarter of this year, but by only 0.3%, revised data showed yesterday.

AFP/Athens

The Greek economy, in recession for six years, shrank again in the second quarter of this year, but by only 0.3%, revised data showed yesterday.

The revised outcome from the statistics office Elstat was slightly worse than an initial estimate of minus 0.2%, but shows that the downturn is running out of steam, notably since the third quarter of last year.

The government forecasts that from now on the economy will show slight quarterly growth, and that the outcome for the whole of 2014 will be growth of 0.6%.

That would mark a a big step away from the national disaster of deep bankruptcy and rescue by the International Monetary Fund and European Union which came close to triggering a break-up of the eurozone.

In exchange for loans totalling more than €240bn ($315bn), the country has applied deep, and highly unpopular, reforms and cuts to pay and pensions to correct its public finances.

Reforms continue in order to improve tax collection and make the economy more efficient and exports more competitive.

The underlying state of the economy is slowly recovering as the second bailout programme approaches the end of its term in December when the country will be expected to have regained sufficient confidence on financial markets to be able to borrow normally.

Borrowing rates for eurozone countries, and notably those in deep difficulties, have fallen sharply in the last year and particularly in the last few weeks.

This is first because the ECB said it would help countries by buying their debt bonds, on tough terms, and more recently because the bank has signalled it may inject huge amounts of cash into the economy to ward off deflation.

The state of national finances and progress of reforms are still under close supervision by the IMF, EU and European Central Bank.

On Tuesday Finance Minister Guikas Hardouvelis and about 10 other ministers and senior officials are to begin three days of talks in Paris with these three creditor bodies, known as the Troika

The Greek government hopes that this auditing working session will be an opportunity for it to begin talks on reducing the debt burden by means of a debt restructuring, meaning reduction of the interest rate payable and of the length of the loans.

After a first such restructuring in 2012, the debt amounted to €318bn or 175.1% of gross domestic product. Most of this is held by the IMF, the EU and ECB.

But the European Commission holds that the talks in Paris are intended merely to prepare for the full routine audit in Athens in September.

If it finds that finances and reforms are in line with targets, it would release the last instalment of EU loans of about €2.0bn.

The last such audit at the end of June led the EU to release about €1.0bn, although this followed several months of difficult negotiations.

Greece is committed to axing the jobs of 6,500 civil servants by the end of the year having already put about 20,000 public service workers on short-time working by either merging or abolishing public bodies.