Greece faces slow, jobless recovery next year

May 17, 2013 - 12:35 PM
Greece Financial Crisis

People reach out for fresh produce distributed by Greek street fruit and vegetable market vendors during a protest in Athens, Wednesday, May 15, 2013. The union of Greek farmers markets went on strike, Wednesday, as protesters set up stands and started distributing vegetables to a fast growing crowd. The market vendors are the latest professional group in Greece to protest a sweeping market liberalization drive demanded by rescue creditors, and timed their protest to draft legislation due to be voted in parliament to implement the new guidelines. (AP Photo/Thanassis Stavrakis)

ATHENS, Greece (AP) — Greece's deep, six-year recession is likely to end in 2014, but growth will be weak and unemployment will remain above 20 percent for another three years, the country's international debt inspectors said.

The European Commission issued the gloomy predictions Friday in a 237-page assessment of Greece's bailout agreement, as the country formally received its latest emergency loan payout, worth 4.2 billion euros ($5.4 billion).

The report cited progress by Greece's year-old coalition government in reforming the economy and public finances, but warned against complacency.

"The implementation of wide-ranging structural reforms remains the prerequisite for stabilizing the economy and laying the foundations for economic growth ... Further efforts are needed."

Greece has been dependent on rescue loans from euro partners and the International Monetary Fund since it got locked out of international bond markets in 2010. So far it has received some 200 billion euros ($257 billion), pledging in return to overhaul its economy.

While the government has said it aims to resume borrowing from bond markets in early 2014, a European Union official involved in the Greek bailout said Friday that Athens was only likely to regain "partial market access, possibly next year."

The official did not elaborate and asked not to be named due to his direct involvement in confidential negotiations with Greece.

Stringent budget austerity measures — including relentless pay and benefit cuts — have slashed high deficits but also hurt economic growth. Unemployment has reached 27 percent, with a staggering 64 percent of those aged 15-24 are without a job.

The Commission estimates that Greece's economy, after contracting 4.2 percent in 2013, will next year grow for the first time since 2008, by 0.6 percent. It warned, however, the recovery remains fragile.

"Should product and services market reforms not accelerate as foreseen under the program, positive economic growth could not return in 2014 as foreseen," it said in its report, which was based on data by representatives of Greece's debt inspectors — the Commission, IMF and European Central bank.

"A failure to implement these reforms in time would thus amplify the social distress coming from very high unemployment and from the pressure exerted on the population by the prolonged recession and the wide-ranging economic and social adjustment."

The jobless rate is projected to peak at 27 percent this year before dropping gradually to 26 percent in 2014 and 21 percent in 2016, the report showed.

While stressing that progress had been made and public finances were improving, the Commission said more must be done to improve Greece's tax collection system and shrink its still oversized public sector.

A survey published Friday by private broadcaster Skai television found 29 percent of Greeks believed the country's financial crisis would last another six to 10 years. Another 27 percent think it will last more than another 10 years.

The Public Issue poll of 1,031 people conducted May 10-15 also found a slight rise in support for the extreme right Golden Dawn party, at 11.5 percent.

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Associated Press writer Derek Gatopoulos and Raf Casert in Brussels in Athens contributed.