Monday 30 May 2016 11:50 am

Setback for Greece as GDP shrinks faster than first thought in first quarter

The Greek economy contracted by a shaper amount that previously thought in the first three months of the year, in a reality-check for the troubled nation following a string of upbeat developments.

Economic output in Greece fell by 0.5 per cent between January and March – sharper than the 0.4 per cent contraction previously pencilled in. 

The fall was down from fragile growth of 0.1 per cent in the final quarter of last year.

The disappointing news comes after a good few weeks for the Greek economy, which included the government smashing forecasts to post a bumper €2.4bn (£1.8bn) primary budget surplus in the first four months of the year earlier.

Read more: The European Union is facing a perfect storm this summer

Those figures came after prime minister Alexis Tsipras pushed controversial tax and spending reforms through the Greek parliament. The new measures, which tighten austerity, were welcomed by Europe, but cost Tsipras even more support from the fragile coalition of MPs affiliated under the banner of his Syriza party.

Last week, Greece and the Eurozone managed to agree terms on unlocking a €10.3bn tranche of its bailout funds as agreed in the programme signed off last summer. However, commentators said the deal represented a missed opportunity, as many crucial details over substantive debt relief measures were lacking.