Tuesday 6 December 2016

More woe as Greece to slip into recession

Angeliki Koutantou in Athens

Published 24/07/2015 | 02:30

Greece's Prime Minister Alexis Tsipras reacts during an emergency parliament session in Athens. Photo: AP
Greece's Prime Minister Alexis Tsipras reacts during an emergency parliament session in Athens. Photo: AP

Greece's creditors are prepared for the start of bailout talks in Athens today, after Greek prime minister Alexis Tsipras successfully passed a second package of reform measures before dawn despite another left-wing rebellion.

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However, Greece's most influential think tank predicted a sharp drop back into recession.

That adds to the headwinds facing Mr Tsipras, who must negotiate a bailout worth up to €86bn with sceptical lenders while struggling to hold his divided Syriza party together.

After another marathon session that ended in the early hours of yesterday, the Greek parliament voted overwhelmingly to approve the second package of reform measures.

But 36 Syriza MPs rebelled, forcing Mr Tsipras to rely on opposition votes.

The rebellion was slightly smaller than in a vote on a first bailout bill last week, when 39 Syriza members dissented. But it confirmed the deep split in the radical left-wing party.

While Mr Tsipras's personal popularity is high, a renewed drop into recession after a modest recovery last year would test his government's ability to push through the tough mix of tax hikes, spending cuts and economic reforms demanded by the lenders.

Greek officials say they aim to wrap the talks up and have a deal approved in parliament by August 20, when another repayment of €3.4bn to the ECB falls due.

The new IMF representative for Greece, Delia Velculescu, and officials from the Commission and the ECB are expected in Athens today. Talks will be on two parallel tracks, one dealing with a new memorandum of understanding on actions Greece has to take and a second stream on the loans it hopes to obtain.

But already there have been doubts about whether the severely weakened Greek economy can support the programme after a six-year slump that has cut national output by a quarter and sent unemployment over 25pc.

In its quarterly report, the IOBE think tank said capital controls imposed last month to save the financial system from a bank run would exact a heavy toll. Reversing a forecast for growth this year of 1pc, made as recently as April, it said the economy would contract by as much as 2.0-2.5pc after growing 0.7pc in 2014, and stay in recession next year.

Banks have re-opened after the ECB restored emergency funding last week but capital controls remain in place, hobbling companies that deal with suppliers outside Greece.

Irish Independent

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