Country Report Greece January 2009

Summary

The Economist Intelligence Unit's central forecast is that an early election will be held before the end of the parliamentary term in 2011.
The cabinet reshuffle suggests that New Democracy (ND) has abandoned its efforts to maintain fiscal discipline in a bid to boost its popularity. We expect ND's popularity to slide again.
If there were to be an early election, the opposition Panhellenic Socialist Movement (Pasok) would be unlikely to secure an absolute majority, implying that an agreement with at least one other party would be needed.
The banking sector has so far not been as severely affected by the financial crisis as in many other countries, but is still being given state support and further measures could be needed as it is heavily exposed to the Balkans.
We expect that the administration will significantly miss its targets for reducing the government deficit, and the deficit in 2009-10 will exceed the ceiling of 3% of GDP established by the EU's Stability and Growth Pact.
Rising debt-servicing costs, a sharp slowdown in credit growth, high inflation and falling business confidence will cause domestic demand to slow.
The current-account deficit will narrow as consumer, investment and import growth slow and there is a strong surplus in net transfers and services.

On January 7th 2009 the prime minister, Costas Karamanlis, carried out a long-anticipated cabinet reshuffle designed to revitalise the government's image in the wake of violent riots and ongoing corruption allegations.
The minister of economy and finance, George Alogoskoufis, and the minister of development, Christos Folias, were removed from government in the cabinet reshuffle.
On December 15th 2008 the parliamentary committee of inquiry investigating the Vatopedi land transfer affair completed its deliberations, and each of the five political parties filed a separate report.
Data published by the general accounting office of the Ministry of Economy and Finance for the first three quarters of 2008 suggest that the budget deficit for 2008 will significantly exceed budget forecasts.
On January 14th 2009 Standard & Poor's downgraded Greece's sovereign credit rating one level from A to A-. As a result, the spread on ten-year Greek bonds over German Bunds rose to 247 basis points.
Consumer price inflation fell sharply from 4.8% in the second and third quarters of 2008 to an average of 3.1% in the fourth quarter.

Source: Country Report

This report covers the following industry codes:
SIC Code: 15;65
NAICS Code: 23;53