Greece’s finance minister Evangelos Venizelos has said the country’s economy is set to shrink more than expected in 2011. The government now expects the economy to shrink by between 4.5% – 5.3%, rather than the 3.9% previously estimated.Greece has been kept solvent by loans from the EU and the International Monetary Fund, on the condition that it reduces its budget deficit.
At a press conference Venizelos said Greece’s shift to economic growth in 2012 now seems unrealistic. The government aims to cut its budget deficit from 10.5% of GDP, to 7.5% of GDP this year (via AP):
“There is undoubtedly a vicious cycle. We have been obliged over the past two years and in the coming three to implement a gigantic fiscal adjustment … which has a negative impact on the real economy. But these are the terms under which we receive our loans and rescue packages.
…”We will see how the deeper recession affects the fiscal result. If all the measures already voted through parliament are implemented, we will be within our targets — or at least extremely close to our targets. And this is the basic issue we will discuss with the troika.”
Meanwhile, Venizelos has written a letter to Euro Group president Jean-Claude Juncker, European monetary and economic affairs commissioner Olli Rehn, and ECB chairman Jean-Claude Trichet, expressing his frustration with Eurozone countries that have demanded collateral if Greece is to receive the next tranche of loans.