Economic policy group: Global slowdown hurting Greek debt effort, recession to last into 2014

ATHENS, Greece – A top international economic body warned Wednesday that Greece’s crippling recession is likely to continue into next year, and urged bailout creditors to intervene as soon as possible to make the country’s debt sustainable.

The Organization for Economic Cooperation and Development said the Greek economy, which is shrinking for a sixth consecutive year, would contract another 0.4 per cent in 2014. In contrast, the Greek government forecasts 0.6 per cent growth.

“We are half a decade into the longest, deepest economic crisis that we have known,” OECD Secretary General Angel Gurria said in Athens, where he presented the report. “But there is hope on the horizon: 2014 promises to be a turning point for Greece.”

Greece has been relying on rescue loans from the International Monetary Fund and other European countries since May 2010. The current conservative-led government plans to return to bond markets next year to finance itself. It also aims to qualify for additional debt relief from creditors after balancing the budget before interest payments.

The OECD, however, said a “less favourable than expected international environment” was likely to undermine Greece’s efforts to bring down public debt. It predicted debt would remain at 160 per cent of gross domestic product by 2020 rather than decline to 124 per cent.

The agency recently revised its prediction for global growth this year to 2.7 per cent from a 3.1 per cent estimate made five months ago.

Gurria said Greece’s bailout creditors should find ways to get Greece’s national debt down without delay.

“One more request. And here I will make it in capital letters: Let’s do it as soon as possible,” he said.

Germany, the biggest bailout lender, has ruled out cancelling a portion of the debt Greece owes, but has appeared open to further improving repayment terms.

Greece has received most of the 240 billion euros in rescue loans ($326.3 billion) from eurozone countries and the IMF since losing access to bond markets in 2010. But austerity measures imposed as a condition to the bailout have hurt the economy, pushing unemployment above 27 per cent and slowing efforts to bring debt down.

In Athens, Gurria handed Greek officials a series of proposals aimed at boosting market activity, from liberalizing Sunday trade to changing regulations for the shelf-life of milk.

A former Mexican finance minister, the 63-year-old economist said he was encouraged by Greece’s progress in reducing debt and its pledge to implement 80 per cent of the OECD’s proposed market reforms.

“I would like to do the Mexican wave,” he said, noting the achievements made. “There is life after debt, and clearly what we have to do is plan for that period.”


AP Writer Nicholas Paphitis in Athens contributed.