Greek economy forecast to shrink up to 4% this year
Deutsche Bank predicts a 4 percent drop in the size of the Greek economy this year in a report released on Wednesday - far more than the 0.3 percent contraction predicted by the Greek stability and growth plan. A European Commission report on the Greek economy forecasts a smaller contraction of 2.25 percent, according to media that have seen leaked versions. The Greek government revised its own original forecast last week and expects the economy to shrink by 0.8 percent of GDP.
Whichever is closer to the mark, the larger-than-expected negative growth gives rise to fears that Greece's fiscal adjustment of four points of GDP this year cannot be realised since GDP will also change. Even so, the Commission apparently says that measures taken so far "appear sufficient to safeguard the 2010 budgetary targets."
The Financial Times reports that members of the eurozone are working out a financial assistance package for Greece to be announced at the meeting of the currency's 16 finance ministers on Monday and Tuesday. It would likely take the form of bilateral loans from other eurozone members backed by state guarantees. Tuesday is also the day when Greece is scheduled to make public a study into how to save its social security system, while a new tax bill goes to parliament on Wednesday.
Comment: The FT's Brussels Blog opines that German conditions towards the rest of Europe stand in the way of a European Monetary Fund: