Country Report Greece June 2009

Outlook for 2009-10

• The Economist Intelligence Unit's central forecast is that an early election will be held before the end of the parliamentary term in 2011, potentially in March 2010, when a new president must be elected.
• If an early election is called, 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.
• The Ministry of Economy and Finance aims to raise ???1bn in privatisation revenue in 2009. The government is seeking strategic investors for the Public Gas Corporation (DEPA) and the Thessaloniki Water and Sewage Company.
• We expect that the government deficit in 2009-10 will significantly exceed the ceiling of 3% of GDP established by the EU's Stability and Growth Pact (SGP).
• Rising debt-servicing costs, a sharp slowdown in credit growth, high inflation and falling business confidence will cause domestic demand to fall and exports will contract even more sharply.
• The current-account deficit will narrow as weak domestic demand and the fall in the price of oil causes imports to contract in value terms, resulting in a significantly smaller deficit on the trade balance.

Monthly review

• Pasok emerged as the party with the most support in the European Parliament elections on June 7th, with 36.6% of the vote. This gave it a lead of 4.3? percentage points over the ruling New Democracy.
• After several months on the back burner, the Siemens affair has been pursued more rigorously in late May and early June.
• Preliminary budget figures suggest poor fiscal performance during the first quarter of 2009. The government announced plans to reduce the deficit in 2009, but these are longer-term measures.
• On May 20th the government announced a ???1.3bn programme of subsidies to finance investment plans for small and medium-sized enterprises.
• On June 2nd the Public Debt Management Agency (PDMA) sold ???8bn in benchmark ten-year bonds, bringing the total amount of borrowing so far in 2009 to an estimated ???55bn.
• GDP grew by 0.3% year on year in the first quarter of 2009, but it contracted by 1.2% compared with the fourth quarter of 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 20;47;10;49;60
NAICS Code: 311;48;212;22;52