Greece hopes for milder recession

ATHENS — Debt-hobbled Greece may see a slightly milder than expected recession this year and aims to issue bonds again on international markets in 2011, Finance Minister George Papaconstantinou said Monday.

ATHENS — Debt-hobbled Greece may see a slightly milder than expected recession this year and aims to issue bonds again on international markets in 2011, Finance Minister George Papaconstantinou said Monday.

Papaconstantinou said efforts to slash the gaping budget deficit from 13.6 in 2009 to 8.1 per cent of gross domestic product in 2010 are well on track.

“We believe we will attain and perhaps exceed the target of 8.1 per cent at the end of 2010,” he said. Athens has committed to bring the deficit under three per cent of annual output in 2014.

Papaconstantinou told a news conference that initial forecasts of the recession-bound economy shrinking by four per cent of GDP this year now appear “excessively pessimistic.”

“The drop was 2.5 per cent in the first quarter, and our first indications for the second quarter show the figure at around three per cent,” Papaconstantinou said. “Based on that, and knowing that there may be a worsening in the third quarter as many of the (austerity) measures kick in, we are in a position to believe that the year will end somewhat better.”

The economy is expected to start expanding again in 2012. Analysts fear protracted recession, combined with harsh austerity measures, could endanger the centre-left government’s ambitious deficit-cutting program.

Greece’s abrupt upward revision of its budget deficit last year — coupled with a euro300-billion (US$376-billion) public debt — shocked the country’s EU partners and the international markets Athens depended on to finance its spending.

Subsequent credit downgrades and spiralling borrowing costs effectively shut Greece out of issuing new debt, and the country only avoided defaulting on its loans in May with the first instalment of a euro110 billion EU and IMF bailout package.

In return, the government cut pensions and public sector pay, increased consumer taxes and heralded sweeping pension and labour reforms — angering labour unions which have held five general strikes this year. A sixth is scheduled for Thursday.

Papaconstantinou said the gradual mending of Greece’s finances should improve its image and help it start issuing government bonds again on international markets earlier than anticipated. He said the government plans to initially test markets again with a treasury bill sale later this month, when some euro4.5 billion (US$5.64 billion) in three-, six- and 12-month debt expires.