With deflation entrenched, its industrial base shrinking and a tough new bailout to service, Greece’s economy is heading for another fall with even those of its citizens lucky enough to be in work poorer than at any time since 2001.
Given that gloomy backdrop the main party leaders, campaigning for what looks certain to be close-run national elections on 20 September, have used the economy – which enjoyed a rare growth spurt in the first half of 2015 – solely as a political weapon.
Alexis Tsipras, former prime minister and leader of leftist Syriza, has promised to fight to improve the terms of the third Greek bailout that he reluctantly agreed to in July and admitted will damage growth.
The conservative New Democracy party’s Vangelis Meimarakis, has blamed Tsipras for pushing the economy towards another recession.
The two have been running neck-and-neck in polls – which suggests voters hold out little hope of an upturn in fortunes regardless of who wins.
The economy grew 0.9 per cent between April and June – the only full quarter in office for Tsipras’ government – as consumer spending rose and exports edged up.
But economists say GDP will soon go back into reverse.
“We expect the economy to shrink by a bit less than two per cent,” Angelos Tsakanikas, economist at IOBE think tank said yesterday, after data showed industrial output fell for the second month running in July and August marked the 30th straight month of year-on-year deflation.
Among factors hurting growth, capital controls were imposed in July, when banks stayed shut for a week, and the €86bn (£62.73bn) bailout deal with its new taxes and pension cuts.
With the danger of an exit from the Eurozone and of a possible overnight devaluation averted for now, Greeks will be less inclined to splash out on consumer goods, especially given salaries are at a 14-year low.
The Greek wage index fell in the second quarter to 85.2, a 14 year low.