Greece dives into first recession in 16 years

GREECE yesterday reported a fourth consecutive contraction in the third quarter, and revised down earlier data to show it slipped into its first recession in 16 years at the very start of this year.

The 0.3 per cent fall in the three months to September was better than a forecast by analysts polled by Reuters, one bright point for Athens, which has been told by the European Union to cut its ballooning budget deficit at a time when most of the euro zone is emerging from recession.

Other data yesterday showed Europe’s recovery gained traction in the third quarter, with Germany and France reporting further growth and Italy’s economy starting to grow too, lifting the euro zone and wider European Union out of recession.

Both Eurostat and the Greek National Statistics Service revised second quarter data to a 0.1 per cent drop, from a previous 0.2 per cent positive growth.

The Greek economy had already suffered two consecutive quarters of falling growth in Q1 2009/Q4 2008, the revised data also showed.

Analysts said the outlook for Greece was bleak, although the 250 billion euro economy did perform better than expected in the third quarter. Economists polled by Reuters had forecast a 0.8 per cent quarterly drop.

Year-on-year the Greek economy shrank by 1.6 per cent in the third quarter, while analysts had forecast a 1.4 per cent fall.

“The figures show that the Greek economy is going through a very difficult period and, unfortunately, we do not see an easy way out,” said Diego Iscaro, at IHS Global Insight.

“Unemployment is rising, credit conditions remain tight, and taxes are going up.  All these factors will weigh down on consumer expenditure during the remaining of the year.”

The new Socialist government, which won an election on October 4, pledged last week to save the debt-laden country from bankruptcy but has forecast a 1.5 per cent GDP contraction for 2009. (Reuters)