EU sees Greek recovery but few jobs

Updated: Friday, 17 May 2013 17:05

Greece's deep, six-year recession is likely to end in 2014, but unemployment will remain above 20% for another three years, the European Commission said today in a report.

Greece has been dependent on rescue loans from other European countries that use the euro and the International Monetary Fund since it got locked out of international bond markets in 2010.

So far it has received €200.9 billion, pledging in return to overhaul its economy.

While the government has said it aims to resume borrowing from bond markets next year, the European Commission, the EU's executive arm, noted in its report that full market access "will remain challenging in the years ahead" due to high debt levels.

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The stringent budget austerity measures that Greece imposed in return for its bailout loans have helped bring debts and deficits down, but have also hurt economic growth.

The measures, which include widespread wage and pension cuts and repeated rounds of tax hikes, have extended the recession into a sixth year and driven unemployment to 27%. A staggering 64% of those aged 15-24 are without a job.

The Commission estimates that Greece's economy, after contracting 4.2% in 2013, will next year grow for the first time since 2008. It forecasts growth of 0.6% in 2014, but warns the recovery remains fragile and will depend on faster reforms.

"Should product and services market reforms not accelerate as foreseen under the programme, positive economic growth could not return in 2014 as foreseen," it said in its report, which was based on data by representatives of Greece's debt inspectors - the Commission, IMF and European Central bank.

"A failure to implement these reforms in time would thus amplify the social distress coming from very high unemployment and from the pressure exerted on the population by the prolonged recession and the wide-ranging economic and social adjustment,'' the report added.

The jobless rate is projected to peak at 27% this year before dropping gradually to 26% in 2014 and 21% in 2016, the report showed.

While stressing that progress had been made and public finances were improving, the Commission said more must be done to improve Greece's tax collection system and shrink its still oversized public sector.

"The fiscal outlook beyond 2014 remains inherently uncertain," the report noted, adding that it "depends to a large extent on progress in strengthening the tax and social security administration."

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