Analysis: Greece heads for record books as economy slumps

Wed Feb 15, 2012 1:33am EST
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By Alan Wheatley and Scott Barber

LONDON (Reuters) - Entering the fifth year of recession, Greece is writing its name in the book of unwanted records for one of the deepest economic slumps of modern times.

The Greek economy shrank 6.8 percent in 2011, leaving the level of output an estimated 16 percent below its pre-crisis peak. Unemployment has soared to more than 20 percent from 7.7 percent in 2008.

Argentina suffered a 20 percent peak-to-trough drop in output as it defaulted on its debts in 2001, while Latvia's economy contracted by 24 percent because of the 2008 global financial crisis.

With more belt-tightening in store in return for a proposed 130 billion euro ($172 billion) international bailout, Athens is on course to join their ranks, and possibly overtake them, said Uri Dadush, an economist with the Carnegie Endowment in Washington, a think tank.

"On the current path - which is not sustainable in my view - we may very well see Greek GDP go down 25-30 percent, which would be historically unprecedented. It's a disastrous crisis for them," Dadush, a former senior World Bank official, said.

For ordinary Greeks, the outlook is dire. Some civil servants have seen their salaries cut by half. Retirement before the age of 65 is a fading dream for those still in work. Some drugs are now in short supply. Couples with children are being forced to move back in with their parents to save money. And across Greece, businesses are closing every day.


For a graphic on austerity   Continued...

The defaced facade of the Bank of Greece is seen after a night of violence which followed the Greek parliament approval of a deeply unpopular austerity bill in Athens, February 13, 2012.  REUTERS/John Kolesidis