Greeks cut spending, economy spirals downward

The debt-laden Greek economy shrank
1.8 per cent in the second quarter as households slashed spending.

The contraction was worse than
expected and compares with the 0.8 per cent shrinkage in the January-to-March
period.

Greece’s national statistics office
said that private consumption dropped 4.2 per cent year-on-year, against a rise
of 1.5 per cent in the previous quarter.

The figures underline Greece’s
struggle against recession and cast a shadow over European stock markets.

The statistics agency said that
gross capital investment tumbled by 18.6 per cent in the second quarter, while
exports fell 5 per cent.

Greece is in the grip of a deep
economic crisis.

The country has imposed radical
austerity measures to balance the books and has been granted $140 billion in
emergency aid from the European Union and International Monetary Fund.

Platon Monokroussos, economist at
EFG Eurobank, said that there would be no let-up for the economy in the short
term.

“Economic growth is likely to
remain firmly in negative territory in the second half, given tight domestic
credit conditions and the government’s austerity programme,” he said.

Worries about sovereign debt hit
stock markets at the start of trading on Wednesday, with all the leading
bourses down and bank shares hardest hit.

Greece was not the only concern,
with Hungary’s economy barely moved in the second quarter.

The country’s gross domestic
product in the April-June period was 0.8 per cent up, but below the European
Union average growth of 1 per cent for the second quarter.

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