ATHENS, Greece – Greece’s prime minister was holding his second ministerial meeting in as many days Wednesday, when official data confirmed the cash-strapped country is back in recession amid concern over much-delayed bailout talks with creditors.
Alexis Tsipras has said his radical left-led government has done as much as it can to strike a deal to get more bailout loans, insisting the ball is now in the court of the creditors.
At stake is a 7.2 billion euro ($8 billion) rescue loan installment, and failure to reach an agreement could lead Greece to default on its obligations within weeks — triggering a chain of events that could force the country to leave the euro.
The head of Greece’s GSEE umbrella private sector union, Yiannis Panagopoulos, said the country’s drop back into recession, at the most crucial point of the bailout talks, highlights the need for a swift agreement “so that Greece can remain in the euro.”
Official flash estimates showed that the economy shrank by 0.2 per cent in the first three months compared with the previous quarter. Following the 0.4 per cent contraction in the last quarter of 2014, the country is now technically back in recession less than a year after it emerged from a downturn as severe as the Great Depression.
Panagopoulos told The Associated Press that any deal with creditors must safeguard “fundamental social issues,” which were “trampled underfoot” by previous austerity measures that included income cuts, tax hikes, scrapping of job protections and increases to the retirement age.
He said an agreement with creditors should respect the government’s promises to restore labour rights and fight new pension cuts, but admits he is not optimistic.
“Our creditors have toughened their positions,” he said, adding that time was lost — and goodwill squandered — with negotiations “on terms and names,” instead of how to restart growth.
He said a deal is better than nothing.
“Otherwise we will no longer be talking about recession but rather a total collapse that will have terrifying repercussions on all of Greek society,” Panagopoulos said.
Eurobank analyst Platon Monokroussos said the economic downturn in the first quarter was less severe than expected, and forecasts slight growth for the year as a whole.
“Expectations for another record year for Greek tourism are supporting expectations for a growth recovery in (the second half), provided of course that an agreement will official creditors will be reached before the present bailout arrangement expires” in late June, he said.
The finance ministry said Wednesday that the January-April budget deficit was about a sixth the size expected, at 500 million euros, while — excluding debt servicing costs — there was a surplus of over 2 billion euros, much better than the 290 million euro target.
However, much of the savings were made through deferring payments for a second month in a row. The government is desperate for cash to pay its creditors — as well as civil servants and pensioners — and last month forced local authorities, hospitals and universities to allow it access to their cash reserves. The target was to raise some 2 billion euros, although so far only 600 million have flowed in as many entities refused to comply.