Greece crisis: More turmoil as country falls back into recession
Published 13/05/2015 | 13:08
Crisis-stricken Greece has fallen back into recession, after the economy contracted by 0.2pc in the first three months of the year.
Figures from the country's official statistics agency showed the debt-laden economy was the second worst performer in the 19-country bloc after Estonia. The figures follow a 0.4pc contraction in the fourth quarter of last year, putting Greece officially back into recession.
The European Commission was forced to slash its yearly growth forecast for Greece to just 0.5pc this year, from an earlier estimate of 2.5pc. This projection is still based the country managing to secure a bail-out deal with its creditors and remain in the eurozone.
Greece briefly hit the heights as the eurozone's fastest-growing economy in the third quarter of 2014. But falling business confidence, eye-watering unemployment and persistent deflation has seen growth prospects take a tumble since snap elections were called in December.
Flagging growth will also throw in doubt Greece's Troika-imposed budget targets. The country's creditors are demanding a budget surplus of 1.2pc to 1.5pc of GDP this year in return for the vital bail-out cash the Leftist government needs to stay afloat.
Governor of the Bank of England Mark Carney said European policymakers were making "heroic efforts" to prevent Greece leaving the eurozone.
He said the European Central Bank "alongside the IMF are working creatively, innovatively and relentlessly to try and avoid [Grexit] in a way that is sustainable".
"I don't think there is any complacency" said Mr Carney, who added that an exit would only have a "modest" impact on the UK economy.
Figures from the rest of the eurozone showed France was the comeback country of the bloc this year. French GDP growth was double analyst expectations coming in at 0.6pc in the first three months of the year.
As a whole, the single currency zone grew by 0.4pc, meeting expectations, and hitting a two-year high on the back of falling oil prices and monetary stimulus from the European Central Bank.
Bailed out Cyprus was the best performing economy this year, with growth reaching 1.6pc. This was followed by Spain, which has been reaping the benefits of a number of economic reforms, and grew by 0.9pc in the quarter.