Country Report Greece November 2009

Outlook for 2010-11

• The prime minister, George Papandreou, wants to take steps to increase transparency and reduce corruption in the new government, but it remains to be seen whether he is willing to incur the political costs resulting from this.
• Mr Papandreou has enumerated a series of bills that the Panhellenic Socialist Movement (Pasok) aims to introduce within its first 100 days of government. It is unlikely that he will succeed in meeting this self-imposed deadline.
• The new administration aims to provide fiscal stimuli to support domestic demand and boost government revenue. However, the Economist Intelligence Unit expects the government to struggle to finance its spending programme.
• We expect the government deficit to soar to 13.7% of GDP in 2010, before narrowing marginally to 11.8% of GDP in 2011. Public debt will also increase, to 133.6% of GDP by 2011.
• Private consumption and investment will recover moderately in 2010-11 as the government implements stimulus measures, consumer and business confidence improve and bank lending criteria begin to loosen.
• There are risks to our economic forecast. The government may be forced to implement austerity measures and withdraw its fiscal stimuli. The current-account deficit will remain high in 2010-11 and is indicative of vulnerability.

Monthly review

• Mr Papandreou has demanded a new procedure for appointing the secretaries-general and special secretaries for ministries and regional administrations, which is significantly delaying policymaking.
• Plans to choose a leader of New Democracy have been delayed amid in-fighting about how to elect the new leader. According to opinion polls, Dora Bakoyannis remains the front-runner.
• There has been a resurgence of attacks by home-grown terrorist groups, with two attacks occurring in Athens in October.
• The government has presented its first bill, aimed at redistributing wealth by increasing taxes for the most profitable companies and individuals with large properties. The funds generated will be allocated to low-income groups.
• Since early September, Greek government estimates for the 2009 deficit have risen from 3.7% of GDP to 12.5% of GDP. The minister of finance aims to bring the deficit below 10% of GDP in 2010, but is unlikely to succeed.
• In the first ten months of 2009, the government had already borrowed around €10bn more than it had targeted for the whole year. The total borrowing requirement could soar as high as €70bn by the end of 2009.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48
NAICS Code: 517