ATHENS – New Greek Prime Minister Antonis Samaras faces an even more formidable challenge to get the country’s financial affairs back on track after the release of a report from the think tank founded by his new Finance Minister, Yiannis Stournaras, that projects the economy will shrink by 6.9 percent this year because of the effects of harsh austerity measures demanded by international lenders in return for rescue loans.
The report from the Foundation for Economic and Industrial Research (IOBE) came as Samaras easily won, an expected vote of confidence in the Parliament his New Democracy party controls in a coalition with the PASOK Socialists and tiny Democratic Left party. Earlier, he told lawmakers that he would not pressure the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) for more time to impose more reforms until Greece met more of the previous conditions it insisted upon.
Greece is surviving on a first series of $152 billion in loans from the Troika, which has at hand a second bailout for $173 billion but said more of the pay cuts, tax hikes, and slashed pensions that were attached to the deals are needed, along with privatization, an end to professional monopolies and reducing the workforce by 150,000 over the next three years.
During the run-up to the critical June 17 elections, he narrowly won over the Coalition of the Radical Left (SYRIZA) Samaras said he was going to demand two more years to meet the fiscal targets but almost immediately backed off as soon as he took office and met with Troika officials in Athens. He said he would argue that measures hurting employment should he changed or delayed. Stournaras said he would concentrate on pushing privatization to sell or lease Greek entities and sell off properties to raise critical revenues.
IOBE said the economy is still shrinking because the austerity measures have drastically curtailed consumer spending, created 22.6 percent unemployment and are closing 1,000 businesses a week with empty storefronts filling Athens’ downtown and adjoining neighborhoods. IOBE said unemployment will rise to at least 23.6 percent by the end of the year. There are more than a million people without work, some 750,000 of who have had their benefits expire after one year of payments and are still unable to find a job.
Samaras said he wanted to extend those benefits another year but has made no move to do so. The economic forecast is far more pessimistic than IOBE’s last report in April when it said the economy would contract 5 percent and the jobless rate would be 20 percent, showing how dire the recession is. Samaras said he wanted to make Greece more competitive and bring in more Foreign Direct Investment (FDI) but scores of thousands of businesses are fleeing Greece instead, largely due to big tax hikes, with many going to neighboring Bulgaria.