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Greeks Worried About Possible Recession, But Analysts Are Not Worried


Workers demonstrate against the soaring cost of living in central Athens earlier this year.

Louisa Gouliamaki | AFP | Getty Images

Nearly four years after Greece celebrated the end of its complicated bailout program, its people are increasingly concerned about its economic prospects.

The darkening public mood comes as Greece — like many EU member states — is grappling with soaring food and fuel prices, a trend that has been exacerbated by Russia’s months-long assault on Ukraine.

“Greece is safer but not safe,” Athens resident Michalis Galenianos told CNBC when asked about the prospect of a recession. “I think Greece is more stable today than it was before. I think and hope that the financially dark days of the past will not return.”

Greece went through three successive bailout programs after the financial crisis, which controversially depended on a series of reforms and years of austerity measures. The Greek economy then grew by 1.6% in 2018 and 1.9% in 2019.

However, like the rest of the world, it suffered an economic setback in 2020 and 2021 due to the coronavirus pandemic, and now faces new economic pressures with one of the highest inflation rates in Europe. .

‘I’m worried’

An estimate from the European Statistical Office said headline inflation in Greece was 10.7% in May, down from 9.1% in April. For ordinary citizens, this is a big change.

A Greek woman from Athens in her 30s, who did not want to be named because of her job, told CNBC she has become more aware of where she spends her money.

“Especially on gas for my car and electricity. Whereas I would normally forget the heating was on for a while before, now I’ve become very strict with myself,” she said.

“We’ve already spent a decade being very tight financially and I think it’s devastating to go through this procedure again…I’m mostly scared about my salary and whether there will be cuts again. At the same time, the rents are very high whereas they were not during the financial crisis, and it has become very difficult to provide for me,” she added.

According to a report by eKathimerini, rents across Greece increased by 5% between fall 2020 and fall 2021, but in parts of Athens rents rose by 17%.

Meanwhile, motor gasoline prices and fuel costs are above the EU average, according to a European Commission report released on June 13. And the country’s government has set a price cap on wholesale power prices in a bid to help consumers and industry cope with sky-high costs.

“I’m worried for the well-being of my family, they will struggle to make ends meet,” Vassilis Vasileios, who left Greece a year ago to work in Iceland, told CNBC.

What future for the euro zone?

The broader European outlook is not bright either, and contagion effects are possible.

“Hit harder than the United States by the energy price shock, we expect the eurozone economy to enter recession before the United States,” Berenberg analysts said in a note on Tuesday.

This represents a significant load in the forecasts since the beginning of the year; at the time, Europe’s economic prospects were considered better than those of the United States, but Russia’s invasion of Ukraine changed that.

“If it weren’t for a probable post-Covid-19 return of summer tourists, the recession would probably already be starting,” Berenberg added, forecasting a 0.8% GDP contraction for the eurozone in 2023.

Greek relief measures

However, analysts are not yet sounding the alarm bells for Greece.

Jonas Floriani, analyst at AXIA Ventures Group, said Greece has a high level of savings which will be useful if the economic situation worsens.

At the same time, Greek banks are in a much stronger position than in the aftermath of the global financial crisis, Floriani said, and Athens is receiving the bulk of European stimulus funds, which will help public investment.

And other relief measures may be underway.

Greece faces one of the highest inflation rates in Europe. The government has distributed grants and is considering other measures.

Xinhua News Agency | Xinhua News Agency | Getty Images

“As talks on instant polls are well underway in Greece, the government is expected to announce further voter-friendly measures to counter the impact of the cost of living crisis,” said Wolfango Piccoli, co-chairman of the cabinet. advice. Teneo group, said in a note on Tuesday.

“Athens launched a means-tested program last weekend allowing homeowners to apply for an electricity subsidy of up to 600 euros ($634). . The government is also considering another similar “inflation check” in the 200 euro aid received by many Greeks before Easter to help households cope with rising prices,” he added.

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