Bank of Greece: recession worse than expected

Athens, Greece: The Bank of Greece warned Tuesday that the country faces a worse-than-expected recession in 2012, with the economy set to shrink 5 percent, and urged politicians to make a swift return to cost-cutting measures after the 6 May general election.

Tough conditions demanded for rescue loan deals have pushed Greece into a fifth year of recession and brewed widespread popular discontent. Some economists fear that politicians may be tempted to relax their focus on reforms after the elections.

“Domestic and overseas conditions do not allow for the slightest complacency or relaxation … Full readiness is required the very day after the election campaign ends,” central bank governor George Provopoulos told the bank’s annual general assembly.

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The European Union had recently predicted a 4.75 percent reduction in Greek economic output this year. As the economy contracts, it becomes more difficult for the government to reduce its deficit.

Provopoulos urged parties to stick to Greece’s punishing austerity measures after the elections, warning that political uncertainty would have “particularly harmful” consequences for the economy.

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Opinion polls indicate neither of the traditionally dominant parties - the socialist Pasok and conservative New Democracy - will gain enough votes to form a government without a coalition.

The financial and economic crisis has seen a rise in anti-bailout political parties, with even the Neo-Nazi Golden Dawn party vying for seats in the next parliament.

New Democracy led in the final opinion polls published last Friday, and could seek to renew an uneasy coalition partnership with Pasok that was created in November.

“If after the elections, the slightest doubt is cast on the will of the new government and society to carry out the (reform) program, today’s positive prospects will be reversed and the country will rapidly find itself in a particularly harmful situation,” Provopoulos said.

AP