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Slow Growth Seen For Greece, Spain and Portugal

Mario Draghi
Mario Draghi

Economists – who’ve often been wrong trying to gauge what would happen in Greece – see molasses-slow recovery gradually returning later this year as well as in debt-wracked Spain and Portugal, even though all three countries face rough sledding for some time to come.
A Reuters poll of 46 economists showed austerity has caused the southern economies to shrink far more than authorities predicted but will slowly lead to lagging fiscal improvement, although unemployment will keep rising, bad news for Greek Prime Minister Antonis Samaras who has promised to reduce the record 26.8 percent jobless rate.
The outlook for Spain, Portugal and Greece has worsened in almost every quarterly poll since the first one was conducted in June 2011. The forecast for Irish growth was cut for the first time since April 2012. The gloom is incongruous with optimism in financial markets that started when European Central Bank President Mario Draghi promised in July to do “whatever it takes” to preserve the euro.
The poll showed that Greece, Portugal and Spain should exit recession next year, although growth will be so slow that it will hardly make up for the huge declines in output since the start of the sovereign debt crisis in 2010. Pay cuts, tax hikes and slashed pensions have worsened Greece’s recession, closed 68,000 businesses and made Greeks slow spending almost to a standstill, offsetting big tax hikes.
Despite the gilded optimism, the economists said that Greece, in particular, is destined to suffer another year of depression, and worse than October 2012’s forecast, although economists think it will make better progress in slimming its budget deficit. The economy will shrink around 4.3 percent this year compared to the 3 percent decline penciled in last October.
Still, the poll suggested the Greek depression is starting to ease, even if a recovery may be years off, little solace to Greeks who’ve already been suffering under nearly three years of austerity. The economy will eke out a tiny amount of growth in 2014, perhaps around 0.2 percent, the poll showed.

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