Greece stuck in recession, bailout targets at risk

Mon Aug 12, 2013 9:04am EDT
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By Harry Papachristou and Renee Maltezou

ATHENS (Reuters) - Greece's recession eased slightly in the second quarter but not nearly enough to boost tax revenues to levels the government needs to meet its bailout targets, figures showed on Monday.

The data follows a magazine report saying Germany's central bank saw risks to the rescue package aimed at keeping Greece afloat and expects the euro member to need more aid in 2014 after it scraped through the last aid review.

As Europe's largest economy Germany has funded a chunk of the bailout but there has been resistance from German voters who are also facing tight budgets. The subject of Greek aid has played into the campaign for elections next month.

The Greek data showed the economy shrank at an annual pace of 4.6 percent in the second quarter, according to the country's statistics agency ELSTAT.

The economy has slumped 23 percent in real terms since 2008, hurting tax revenues and making it hard to meet targets agreed with international lenders who backed the 2010 bailout.

The figure was slightly better than economists' average forecast for a 5 percent contraction, but that will be cold comfort for Greeks, who are facing a sixth consecutive year of recession in 2013, as austerity measures have crippled private consumption, the main engine of its economy.

The slump, one of the biggest peace-time recessions recorded in history, is undermining the ability of firms and households to pay taxes, separate budget figures showed on Monday.

Gross tax revenues lagged targets by about 1.5 billion euros ($2.14 billion) in the first seven months of the year, hit by record unemployment of nearly 28 percent and a wave of corporate bankruptcies.   Continued...

Public sector employees march during an anti-austerity rally outside the finance ministry in Athens August 1, 2013. REUTERS/Yorgos Karahalis