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  Greek economy implodes further (Q2) (search mode)
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« on: September 10, 2011, 10:32:05 am »

ATHENS—Greece's economy sank deeper into recession in the second quarter than previously forecast, with gross domestic product contracting by 7.3% on the year, data from the Hellenic Statistical Authority showed Thursday.

Plunging domestic consumption was mostly responsible for the steep contraction rate in a trend likely to continue in the coming months, economists said, and offsetting gains for a strong year from the country's tourism sector.

Last month, a flash estimate provided by the statistics agency showed that Greece's annual economic output contracted 6.9% in the second quarter, compared with a decline of 8.1% in the first three months of the year.

"The difference of 0.4% in the GDP growth rate, compared with the flash estimate announced on Aug. 12, is due to the availability of new data, mainly on the turnover in the services sector," the agency said in a statement. The figures are nonseasonally adjusted.

Total economic activity in Greece in the April-to-June period reached €40.7 billion ($56.8 billion), down from €43.9 billion in the same period last year, according to the statistics agency. Investment activity for the same period plummeted 17.9%, it added.

Consumption, a key component of the Greek economy, fell 6.8% on an annual basis, easing from a drop of 7.4% in the first three months of the year. But economists say that the slightly smaller decline in second quarter consumption may be short lived and attributed it to the timing of Easter holidays this year that straddled the first and second quarters.

With consumers bracing for the implementation of further austerity measures, promised in exchange for a fresh bailout to Greece, spending will continue its downward course.

"The tourism sector will provide support to the economy in the third quarter, but it is insufficient to offset an accelerated drop in domestic demand," said , senior economist at National Bank of Greece.

In late June, Greece introduced a raft of tax rises and spending cuts as part of a five-year budget plan for 2011-2015 in exchange for a fresh aid package from the European Union and International Monetary Fund.

The latest austerity plan followed fiscal measures gradually adopted since May 2010 when the country received an initial €110 billion EU/IMF bailout to stave off default.

With many reforms taking effect this month, Greek public and private sector workers launched Thursday a barrage of strike action that is set to continue in coming days.

Taxi owners walked off the job for 24 hours, opposing the deregulation of their profession, while doctors joined dentists in staging the first day of a 48-hour walk out in opposition to health sector changes. Tax office employees and customs officials are also scheduled to strike on Monday and Tuesday over cuts to benefits.

Additionally, Athens garbage collectors will launch 48-hour rolling strikes starting Monday and teachers will stay home on Sept. 22.

Finance Minister Evangelos Venizelos recently revised lower Greece's official economic forecast for 2011. The government now sees the economy contracting by 5.3% this year—against a previous forecast of a 3.9% decline.

Mr. Venizelos also acknowledged that the recession could continue into 2012, where previously the government was expecting an upturn.

Uncertainty over Greece's debt burden and deteriorating labor market conditions have knocked consumer sentiment to record lows.

Data showed Thursday that Greece's unemployment fell to 16% in June from 16.6% in May, but remained sharply above the rate of 11.6% a year earlier.

An estimated one million Greeks will be jobless by the end of this year, up from some 793,000 currently, Greece's private sector umbrella union GSEE said Thursday in a report.

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