Economic sentiment in recession-hit Greece fell to a seven-month low in June as consumer confidence and the manufacturing and construction sectors were worst hit, the country’s leading economic institute said on Wednesday.
With unemployment hitting record levels above 22 per cent and wages squeezed by higher taxes, Greek consumers remain the most pessimistic in Europe, the Foundation for Economic and Industrial Research (IOBE) said.
Greeks are struggling in the face of austerity measures required under the country’s international bailout and the survey showed that three in five expect their economic situation to worsen in the next 12 months.
The think tank said its index – based on consumer confidence gauges and indexes for business expectations in manufacturing, construction, retail and services – fell to 74.1 points in June from 76 points in May. It was well below its average level of 100 in 1996-2006.
However, the foundation said economic sentiment in retail trade and services improved marginally.
The drop in Greece’s overall economic sentiment in June compared with a drop in the euro zone’s reading in the same month, to 89.9 points from 90.5 in May.
Greek elections in June resulted in the formation of a conservative-led government, ending weeks of political uncertainty that had rattled financial markets and threatened to push the near-bankrupt country out of the euro zone.
Greece’s fiscal derailment in 2009, when its budget deficit ballooned to 15.6 per cent of national output, sparked its worst economic crisis since World War Two and has forced it to seek two international bailouts since 2010.
The €215-billion ($271-billion U.S.) economy is expected to contract by more than 5 per cent this year after a 6.9 per cent slump in 2011.
The new coalition government wants to tweak the policy mix prescribed by the “troika” of lenders – the European Union, European Central Bank and International Monetary Fund – who bailed out the country, but the lenders have warned there is little room for negotiation.
The “troika” is due to visit Athens again this week, but Greece’s main retail association ESEE said previous visits had had a negative effect on consumer sentiment.
“The ‘troika’ visits and the subsequent announcement of extremely unpleasant and painful measures have an immediate effect on households and businesses,” ESEE said in a statement. “Clearly the troika harms the Greek market.”
It also said 12 visits by the “troika” so far had led to losses worth more than 2-billion euros for retailers and each visit had helped depress retailers’ revenues by up to 11 per cent.