More misery ahead for Greeks as economy set to shrink again

Tue Nov 10, 2015 7:12am EST
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By Jeremy Gaunt

LONDON (Reuters) - Any Greeks hoping their days of economic pain are over following the latest bailout agreement with international lenders should look to the dire projections from Europe's three main institutional forecasters for a reality check.

The European Commission, the OECD and the EBRD all say Greece is heading into recession again this year and next, sinking back into the mire after last year's positive reading ended a six-year depression.

The light at the end of the tunnel, all three say, may be some growth returning during next year - but it is highly dependent on economic and banking reform.

There will be arguments about why Greece remains in such a state - from accusations in Athens that lender-imposed austerity has crushed the life out of the economy to gripes from Brussels that Prime Minister Alexis Tsipras's leftists wasted what improvements had been achieved.

The two sides are again at loggerheads - albeit possibly temporarily - over reforms and bailout cash, with the added complexity that Tsipras does not want to see indebted Greeks lose their homes while the country is providing food and housing for thousands of asylum-seekers.

But there is no disagreement among the forecasters about the direction the Greek economic is heading.

Both the Commission and the OECD (the Organisation for Economic Co-operation and Development) see a 1.4 percent contraction this year, while the EBRD (the European Bank for Reconstruction and Development) sees 1.5 percent.

This is particularly severe given the first half of the year saw growth of 1 percent, put down to Greeks running out to buy durable goods ahead of a threatened "Grexit" from the euro zone.   Continued...

A Greek national flag flutters atop the parliament building in Athens, Greece, October 30, 2015.  REUTERS/Alkis Konstantinidis -