Greek economy contracted by less than expected in second quarter

The Greek economy contracted at a better-than-expected annual rate of 4.6 per cent in the second quarter of the year, down from the 5.6 per cent contraction in the first quarter. Analysts had expected to see it shrink by five per cent.

Earlier today, the Greek government reported it had hit a primary budget surplus for the period January to July 2013 - a big win for finance minister Yannis Stournaras.

And an expected tourism boost in the third quarter should ease contraction further, with analysts now expecting full-year contraction to be no more than 4.2 per cent.

Greece is nevertheless still headed for its sixth year of recession.

Relatively encouraging GDP data and a primary budget surplus could help German chancellor Angela Merkel's case that the Greek economy is on track to recovery, and thus won't need more aid payments in the near future in the run-up to elections in September.

But a report from the Bundesbank, cited in Der Spiegel this weekend, said it expects Greece will need additional rescue loans from its European partners by the start of 2014 at the latest.