Greece debt crisis: With today's stockmarket shocks and manufacturing data, further economic contraction seems inevitable

 
Vassiliki Koutrakou
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It's not just the financial institutions that have suffered of late (Source: Getty)
Further economic contraction in Greece seems inevitable after today's bad news.
The three-year Troika austerity programme’s challenges to the business and manufacturing sectors have paled into insignificance compared with the impact on the country caused by Alexis Tsipras and the Syriza government.
Although accounting for only about 10 per cent of the Greek economy, the manufacturing sector is a vital part of the country’s recovery, but has found it near impossible to source raw materials and semi-finished goods on credit due to lack of trust.
With the government shutting down the banking system for several weeks and imposing capital controls, it was not just the financial institutions that faced collapse. Factories had their operations severely hampered and lost numerous new orders, and a variety of businesses have been closing at record rates.
This is not unexpected after a six-year recession and recent dramatic events, but the magnitude of the stockmarket downturn today will have exacerbated worries over any prospects of economic recovery in the medium, let alone in the short term.
Some might see this as a good time to buy in Greece; for others it will be an unwarranted gamble.
International markets were, interestingly, reasonably prepared for this morning’s turn of events so the wider Eurozone stockmarkets held their nerve.
And those huge declines in the Athens Stock Exchange today became more moderate as the day and some semblance of cautious normality in business activity could begin again.
But investors will need a sign that economic and political stability is forthcoming - and given the deep fractures in Syriza and beyond that is far from guaranteed. With another set of elections possible and renewed instability likely, the country has much to do before it will return from the brink.

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