Greece sinks deeper into devastating depression

City A.M. Reporter
GREECE’S battered economy shrank by an annual rate of 6.2 per cent in the second quarter of the year as it sank further into a devastating recession, data revealed yesterday.

The figure came ahead of today’s GDP figures for France, Germany and the Eurozone.

The Greek economy shrank by 6.5 per cent annualised in the first three months of the year, meaning the pace of decline has slowed.

Yet the troubled Eurozone member state’s economy is now 16 per cent smaller than its 2008 peak, returning to a size last seen nearly a decade ago, in 2003.

“Hopefully it’s some sign that the rate of decline is starting to bottom out,” said Markit economist Chris Williamson. “And hopefully the first half of the year was as bad as it gets and we’ll see some improvement now.”

But the think tank IOBE expects Greek GDP to shrink 6.9 per cent during the course of this year as a whole.

The dire economic situation continues to harm any attempts to rein in the substantial annual government deficit towards sustainable levels – the core target of Greece’s bailout programme.

Meanwhile, Bank of Greece data yesterday revealed that Greek lenders turned to their country’s central bank for liquidity last month after the European Central Bank (ECB) stopped accepting Greek government bonds as collateral from 25 July.

The ECB has cut off the banks pending the latest report on Greece by EU and IMF inspectors, stepping up pressure on Athens to adhere to the terms of its bailout programme.

ECB funding to Greek banks fell by €49.67bn in July from a month earlier while emergency liquidity assistance from the Greek central bank increased by €44.37bn, according to the figures.

The ECB also confirmed yesterday that it did not restart its bond buying programme last week, although it still plans to launch a new and more transparent scheme for purchasing sovereign debt that will be tied to intervention by the European rescue funds and political action.

Italy yesterday sold €8bn (£6.3bn) of 12-month Treasury bills at an auction yet had to pay 2.767 per cent – slightly higher than at a similar auction last month. Germany, meanwhile, sold €3.77bn of six-month Treasury bills at a negative yield.