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The decline of the Greek economy will surpass current expectations and will reach 5% this year, said the head of the Central Bank, quoted by Reuters. In March, the bank predicted 125-billion economy of Greece to shrink by 4.5% in 2012, having reported a decline of 6.9% last year. This is the fifth consecutive year of recession for the country, which has already received double international assistance. As yet another gap between expectations and realities of government in the economy.
At the annual meeting of the bank George Provopoulos, who is a member of the board of the European Central Bank called for strict adherence to fiscal reforms and commitments undertaken by Greece in exchange for emergency loans from the EU and the International Monetary Fund.
The central banker expects the current account deficit of Greece to shrink to 7.5% of GDP this year from 9.8% in March 2011 was forecast to shrink by 7%.
“The expected decline in labor costs per unit of output in 2012-13, along with projected trends in prices will lead to significant improvements in competitiveness and contribute to increased exports,” he said.
Provopoulos also warned that Greece’s membership in the euro area is at risk if it fails to fulfill its promises to its creditors, especially after the upcoming parliamentary elections. “If the elections to cast doubt about the intention of the new government and society to implement the program, the present favorable prospects will turn,” he notes.
The Greeks will elect their new government on May 6, according to recent sociologic studies – two major parties of the ruling coalition now – PASOK and New Democracy would only secure a parliamentary majority. Whoever wins will have to agree to further cuts costs by 5.5% of GDP or 11 billion for 2013-2014, and to provide another 3 billion through improved tax collection. These are the latest requirements of the IMF to continue granting financial assistance to the country.