Bank of Greece: Output down 20.1 per cent, but economy "clearly improving"

ATHENS, Greece – The recession in Greece has cut output by 20.1 per cent between 2008 and 2012, but the country’s economy is “clearly improving” after avoiding the dangers of a default and euro exit, the governor of the Bank of Greece said Monday.

European Central Bank governing council member George Provopoulos said Greece’s economy would remain stuck in recession in 2013, with unemployment expected to continue rising this year.

“The danger of (financial) collapse has been overcome and exit from the euro made more remote, while trust is steadily being regained,” Provopoulos made the remarks while presenting the central bank’s annual report.

Greece’s annual gross domestic product is set to contract by 4.5 per cent this year, the report said, which matches revised government forecasts.

Successive tax hikes and state spending cuts have pushed unemployment up to 27 per cent, according to data for last November, while 61.7 per cent of workers under age 24 are jobless.

Finance Minister Yiannis Stournaras sought to reassure austerity-weary Greeks that they face no further cutbacks — provided the conservative-led coalition government sticks to previously agreed measures.

“We will not need to take additional measures … if we implement our current program,” he said in an interview late Monday on private Mega TV.

Stournaras also played down fears, sparked by comments earlier this month from a senior ministry official, that minimum wages could be cut further from the current level of just above €500 ($666) a month.

“The government has no intention of further reducing the minimum wage,” he said.

Stournaras added that the government opposes pressure from its bailout creditors to sack civil servants, arguing that the number of people on the public payroll has already been significantly reduced through attrition.

After years of government overspending that piled up a huge public debt, Greece narrowly avoided bankruptcy in 2010 through a program of rescue loans from its eurozone partners and the International Monetary Fund.

In exchange, it implemented deeply resented income cuts and tax hikes to tame its budget deficit.

Bank of Greece governor Provopoulos urged politicians not to use the recession “as an excuse” to avoid implementing agreed austerity measures.

“Important developments have created a clearly improving situation for the state of the economy … but there is no room for complacency,” he said.