Greece now in 'Great Depression'

Mon, Jul 23, 2012, 01:00

Greece is in a "Great Depression" similar to the American one in the 1930s, the country's prime minister Antonis Samaras has told former US president Bill Clinton.

Mr Samaras was speaking before a team of Greece's international lenders arrive in Athens to push for further cuts needed for the debt-laden country to qualify for further rescue payments and avoid a chaotic default.

Athens wants to soften the terms of a €130-billion bailout agreed last March with the European Union and the International Monetary Fund, to soften their impact on an economy going through its worst post-war recession.

By the end of this year Greek GDP is expected to have shrunk by about a fifth in five consecutive years of recession since 2008, hammered by tax hikes, spending cuts and wage reductions required by two EU-IMF bailouts.

Unemployment climbed to a record 22.6 per cent in the first quarter.

"You had the Great Depression in the United States," Mr Samaras told Mr Clinton, who was visiting Greece as part of a delegation of Greek-American businessmen.

"This is exactly what we're going through in Greece - it's our version of the Great Depression."

Athens must reduce its budget deficit below 3 per cent of GDP by the end of 2014, from 9.3 per cent of GDP in 2011 - requiring almost another €12 billion in cuts and higher taxes on top of the €17 billion successive governments have cut from the budget shortfall.

Greece wants its lenders to give it two more years to achieve the budget goal to avoid an even deeper economic slump but its lenders have opposed the idea because it would imply even more financial aid.

Highlighting growing frustration with Athens, German magazine Der Spiegel reported yesterday, citing high-ranking representatives in Brussels, that the IMF may not take part in any additional financing for Greece.

The German and Greek finance ministries declined to comment on the report, which suggested additional support required for Athens could range from €10-€50 billion.

Reuters