Greece now in "Great Depression", PM says

ATHENS Sun Jul 22, 2012 11:38am EDT

Greek Prime Minister Antonis Samaras (L) and visiting Former U.S. President Bill Clinton wave to reporters during their meeting in Athens July 22, 2012. REUTERS/John Kolesidis

Greek Prime Minister Antonis Samaras (L) and visiting Former U.S. President Bill Clinton wave to reporters during their meeting in Athens July 22, 2012.

Credit: Reuters/John Kolesidis

Related Topics

Photo

Air strikes in Gaza

Our latest photos from the scene.   Slideshow 

ATHENS (Reuters) - Greece is in a "Great Depression" similar to the American one in the 1930s, the country's Prime Minister Antonis Samaras told former U.S. President Bill Clinton on Sunday.

Samaras was speaking two days before a team of Greece's international lenders arrive in Athens to push for further cuts needed for the debt-laden country to qualify for further rescue payments and avoid a chaotic default.

Athens wants to soften the terms of a 130-billion euro bailout agreed last March with the European Union and the International Monetary Fund, to soften their impact on an economy going through its worst post-war recession.

By the end of this year Greek GDP is expected to have shrunk by about a fifth in five consecutive years of recession since 2008, hammered by tax hikes, spending cuts and wage reductions required by two EU/IMF bailouts. Unemployment climbed to a record 22.6 percent in the first quarter.

"You had the Great Depression in the United States," Samaras told Clinton, who was visiting Greece as part of a delegation of Greek-American businessmen. "This is exactly what we're going through in Greece - it's our version of the Great Depression."

Athens must reduce its budget deficit below 3 percent of GDP by the end of 2014, from 9.3 percent of GDP in 2011 - requiring almost another 12 billion euros in cuts and higher taxes on top of the 17 billion successive governments have cut from the budget shortfall.

Greece wants its lenders to give it two more years to achieve the budget goal to avoid an even deeper economic slump but its lenders have opposed the idea because it would imply even more financial aid.

Highlighting growing frustration with Athens, German magazine "Der Spiegel" reported on Sunday, citing high-ranking representatives in Brussels, that the IMF may not take part in any additional financing for Greece.

The German and Greek finance ministries declined to comment on the report, which suggested additional support required for Athens could range from 10-50 billion euros.

NO MORE

Officials have already indicated there would be a shortfall on the current bailout. How much is likely to depend on the extent by much Greece continues to miss its fiscal targets and the extent of support needed to keep its major banks afloat.

German economy minister Philipp Roesler told ARD public television he did not expect Greece could fulfill its requirements and that that would mean no more money to Athens.

"I am more than skeptical," Roesler, who is the head of the junior party in Germany's ruling coalition and often outspoken on euro zone issues, said in an interview.

"If Greece does not fulfill its requirements, there cannot be any more payments to Greece," added Roesler, whose views often do not reflect those of Chancellor Angela Merkel or Finance Minister Wolfgang Schaeuble.

The inspection team of the international "troika" of the EU Commission, the IMF and the ECB will focus on the 11.7 billion euros of spending cuts Athens needs to take in 2013 and 2014.

Clinton criticized Greece's lenders for focusing excessively on austerity, saying Athens will be more likely to repay its debt if its manages economic recovery first.

"(It) is self-defeating... if every day people are saying this may or may not work to give us back 100 cents on the dollar, so give us more austerity today," he told Samaras.

"People need something to look forward to when they get up in the morning - young Greeks need something to believe in so they can stake their future out here," Clinton said.

(Reporting by Harry Papachristou in Athens, Markus Wacket and Annika Breidthardt in Berlin; editing by Patrick Graham)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (10)
Krowster wrote:
Welcome to the world of compunding interest, where your moneys is taken from you twice as fast under the guise that it presented opportunity cost. However, no one has ever measured this opportunity lost opportunity against the money that will be spent seeking it out.

We need to eleiminate or drastically change from a compounding interest rate to a simple fix rate, and eliminiate the greed and suffering it’s causing humanity.

Jul 22, 2012 9:32am EDT  --  Report as abuse
mulholland wrote:
Government debt can stimulate an economy, but the economy slows when the debt is repaid.

Why does this baffle politicians?

File this under ‘no such thing as a free lunch’.

Jul 22, 2012 11:31am EDT  --  Report as abuse
ejhickey wrote:
If I was Greek , I toowould be depressed.

Jul 22, 2012 12:04pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.