Greek woes continue, GDP down 6.2%

Greece’s economy shrank 6.2% on an annual basis in the second quarter, a slump expected to persist as the government scrambles to nail down billions in additional cuts to keep international bailout funds flowing.

Greece’s economy shrank 6.2% on an annual basis in the second quarter, a slump expected to persist as the government scrambles to nail down billions in additional cuts to keep international bailout funds flowing.

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But the fiscal drag caused by the pursued austerity policies coupled with liquidity constraints and lingering uncertainty is likely to keep recessionary headwinds in full force.

“We project GDP to contract by 7.1% in 2012 and by 2.4% in 2013, on the back of further significant declines in disposable incomes, rising unemployment and plummeting investment activity," Eurobank economist Theodore Stamatiou said.

Greece’s jobless rate has already climbed to 23.1%, with 55% of those aged 15-24 out of work, a desperate situation that fed into the popularity of anti-bailout parties in elections earlier this year.

The three-party coalition government that emerged after two rounds of polls is working to nail down 11.5 billion euros of savings and plans to revive a labour measure targeting 40,000 public servants for eventual dismissal.