Country Report Greece March 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, potentially in March 2010, when a new president must be elected.
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 general government deficit in 2009-10 will significantly exceed the ceiling of 3% of GDP established by the EU's Stability and Growth Pact (SGP) and Greece is likely to face the excessive-deficit procedure (EDP).
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 March 1st the prime minister, Costas Karamanlis, announced that he has ruled out the possibility of early elections in Greece and asked for co-operation from opposition parties in reducing the public deficit and debt.
There has been a significant increase in lawlessness in Athens, with some acts claimed by urban guerrilla movements and others by anarchists. The Hellenic Police have created 30 rapid-reaction teams to respond to these incidents.
On February 25th Mr Karamanlis proposed a programme to his cabinet designed to promote fiscal discipline.
According to preliminary estimates for 2008, the general government debt reached 93.1% of GDP. So far, the public debt management agency has covered 52.6% of its estimated 2009 borrowing needs, but at a considerable cost.
On March 6th the government announced that it had accepted an offer from private portfolio company, Marfin Investment Group (MIG), to sell the three arms of Olympic Airlines for 177.2m.
GDP grew by 2.4% year on year in the fourth quarter of 2008, resulting in annual GDP growth of 2.9%.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1;49;15;39
NAICS Code: 11;22;23;31