Greece’s economy will suffer fresh damage from the austerity measures demanded by its creditors and will remain stuck in permanent depression unless it receives substantial debt relief, one of the UK’s leading thinktanks has warned.
The National Institute of Economic and Social Research said the increases in VAT reluctantly accepted by the Syriza-led coalition in Athens in exchange for a new bail out will result in a 1% fall in national output in 2016.
In its quarterly analysis of the state of the global economy, NIESR said that by the time the Greek economy stops contracting in the middle of next year, gross domestic product would be 30% lower than at the start of the crisis in 2010 and 7% lower than when the country joined the single currency in 2001.
The report was published following a second day of heavy selling of bank shares on the Athens stock market. On Monday five shares comprising the banking index – National Bank of Greece, Alpha Bank, Piraeus Bank, Attica Bank and Eurobank – suffered double-digit losses, including three over the 30% limit that triggered an automatic trading suspension. The same group again suffered losses near the 30% level on Tuesday, with trading in Piraeus Bank shares suspended.
However, after falling by a sixth on Monday, the main Greek stock market index had a steadier day as it posted a decline of just over 1%.
Banks have been hit hard by a combination of a poorly performing economy, deposit flight, the rising number of non-performing loans and the capital controls introduced by the Greek government in late June. Shares in banks have lost half their value in the past two days and two thirds of their value since Syriza’s general election victory in January.
Read more:
http://www.theguardian.com/business/2015/aug/05/niesr-warns-on-further-greek-austerity
