On Monday, Greece’s Finance Minister Evangelos Venizelos said he expects that Greece’s ailing economy will shrink even more than expected this year. This will put even more pressure on the country’s ambitious deficit cutting efforts. The forecasted annual output will be 4.5% to 5.3% of the country’s Gross Domestic Product according to the Greece’s finance ministry.
During a news conference on Monday August 22, 2011, Minister Venizelos called on the European Union to fully and immediately implement an agreement reached last month overhauling the euro-zone’s rescue fund and extending a bailout. Greece is only being kept solvent by a double rescue deal worth around $317 billion from its European partners and also the International Monetary Fund. European Union and IMF officials will go to Athens later this week to monitor the progress undertaken by the Greek government. Further disbursement of the rescue loans depends on how satisfied the EU and IMF officials are with the progress.
At this point, Greece is in a world of hurt. The government has agreed to strict fiscal adjustment which in turns puts huge restraints on the real economy and has created a cycle that Greece had hoped to break by early 2012. It now looks unlikely that 2012 will bring any growth in the economy, which is what the Greeks really need.
There are now rumblings of more austerity measures, but it is highly unlikely the Greek people will let the government add to the year and a half old austerity program already implemented. Unemployment rates are fast approaching 17% and there have been repeated tax hikes. General strikes by ordinary workers and the unions alike leads one to believe that the Greek government may reach a breaking point sooner than later.
All this news from Greece continues to spotlight the ongoing problems with Europe’s economies and gives rise for concern in the U.S. markets as well.