Greece returns to recession as talks with creditors drag on

Greece’s economy returned to recession in the first quarter as delays in concluding talks between the government and its creditors raised the spectre of another debt drama.

Gross domestic product contracted 0.1 per cent in the first three months of the year after shrinking 1.2 per cent in the previous quarter, the Hellenic Statistical Authority said. The seasonally adjusted contraction was 0.5 per cent from a year earlier.

Talks between creditors on easing the country's debt load are accelerating after Greece and officials from the International Monetary Fund and euro-zone institutions ended a months-long impasse over the austerity measures the government is obliged to take. That has prompted a rally in Greek stocks and bonds this month, but the delay has taken a toll on the economy.

That cost led the government to cut its GDP growth forecast for this year to 1.8 per cent from 2.7 per cent on Saturday. The European Commission reduced its estimate to 2.1 per cent last week.