Greek unemployment falls for first time since 2008

ATHENS Thu Mar 7, 2013 5:59am EST

People walk outside an unemployment bureau in Athens February 14, 2013. REUTERS/John Kolesidis

People walk outside an unemployment bureau in Athens February 14, 2013.

Credit: Reuters/John Kolesidis

ATHENS (Reuters) - Greece's jobless rate fell in December for the first time since a crippling recession began five years ago, helped by a bailout deal that propped up companies' willingness to hire in the short-term.

Unemployment in the debt-choked nation dropped to 26.4 percent from a revised, record 26.6 percent a month earlier, state statistics service ELSTAT said.

It still remains the euro area's highest and is more than twice the bloc's average unemployment reading of 11.8 percent but was the first time it had fallen since May 2008.

Greece is still deep in recession thanks to the tax rises and searing cutbacks in state spending required by the European Union and International Monetary Fund under its 240 billion euro bailout.

A new EU/IMF funding deal late in November again eased fears over the country's euro zone membership and may have boosted short-term employment, economists said. Economic sentiment in December rose to its highest in almost three years.

"Reduced uncertainty after the deal and the disbursement of new rescue loan tranches seems to have boosted seasonal hirings from their extremely low level of previous months," said Nikos Magginas, an economist at commercial Greek lender National Bank.

Greece's jobless rate has almost tripled since its debt crisis erupted in late 2009 as austerity measures caused a wave of corporate bankruptcies. The economy is seen shrinking for a sixth consecutive year, by 4.5 percent, in 2013.

Despite the drop, economists cautioned that it was too early to say if the labor market had a hit a bottom.

"The economy continues to shrink rapidly and it is difficult to see a trend reversal in the first quarter," Magginas said.

(Reporting by Harry Papachristou and Lefteris Papadimas, editing by Deepa Babington and Patrick Graham)

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