Greek leader sees economic progress

By Associated Press
August 26, 2010

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ATHENS — Greece’s recession is milder than initially expected and the economy will shrink by less than the forecast 4 percent this year, the finance minister said yesterday, though a separate survey showed many businesses are struggling to stay afloat.

George Papaconstantinou told Parliament that there is now “light at the end of the tunnel.’’

“We all know that three months ago, the Greek economy came to the brink of the abyss. We know that three months ago, it found itself a breath away from a suspension of payments,’’ Papaconstantinou said. “We managed to avert the worst. We managed to avoid bankruptcy.’’

Still, a survey by GSEVEE, an association representing small businesses, which account for about 98 percent of Greek enterprises, showed eight in 10 businesses saw their overall economic situation deteriorate in the first six months of the year.

Greece narrowly avoided defaulting on its debt in May, after receiving the first batch of rescue loans from a three-year, $138.74 billion package from the International Monetary Fund and European Union.

In return, it is implementing a strict austerity plan. It has cut civil servants’ pay, trimmed pensions, overhauled the social security and pension system, and increased consumer and income taxes.

The government has pledged to reduce its deficit from 13.6 percent of gross domestic product last year to 8.1 percent at the end of 2010 and below the EU’s limit of 3 percent for countries using the euro by the end of 2014.

Papaconstantinou acknowledged “jobs are being lost and will be lost,’’ but insisted the overall situation is improving.

“We are starting to see the time at which we will be able to tell Greek citizens that the worst is over, that the Greek economy is stronger, that income is increasing again,’’ he said.

The latest figures show Greece cut its deficit by 39.7 percent from January to July, slightly above the target of 39.5 percent.

German Finance Minister Wolfgang Schaeuble said Greece’s efforts are on “the right track.’’

He added that three months ago few believed Greece would fulfill its commitments. “Seeing what Greece is achieving, one has to have respect,’’ he said.

But while the government’s spending cuts are above target, revenue has grown at a slower pace than expected, and Greek business representatives have been painting a bleaker picture, especially for enterprises employing less than 50 people. According to the GSEVEE survey, 44 percent of the businesses said they will very likely face problems so severe they would have to shut down in the near future.