I had linked recently to an op-ed that described Greece as being in a death spiral. Things seem to just be getting worse.
New figures showed that economic output slumped by 7 per cent year-on-year in the fourth quarter of 2011 – amid increasing fears that Greece will not deliver the £2.8billion cuts package it has pledged in return for another huge bailout.With a crumbling economy, Greece can't count on taxes from greater productivity. In fact, with a declining population, I'm not sure that they could count on taxes even if their economy was doing okay. If they raise taxes on their productive class, their economy will further collapse.
Experts had expected a fall of only 5 per cent ahead of the latest round of deeply unpopular austerity measures.
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Greece is now in its fifth year of recession and faces even deeper spending cuts in exchange for bailout funds from Europe and the Inter-national Monetary Fund.
‘We were expecting the recession to get worse but not at this pace,’ said Nikos Magginas, senior economist at National Bank of Greece.
Fears that Greece is heading for a chaotic default on its towering debts were fuelled after an emergency meeting of eurozone finance ministers planned for tonight was cancelled.
Jean-Claude Juncker, the Luxembourg Prime Minister who chairs the so-called eurogroup, said he was still waiting to receive assurances from Greek leaders over the £2.8billion package of cuts to wages, jobs and pensions.
Athens went up in flames on Sunday night as Greek MPs voted for the savage austerity bill to satisfy their international paymasters and secure a new £110billion bailout.
Mr Juncker said ‘further technical work’ was required between Greece and the troika of lenders – the European Union, the European Central Bank and the IMF – including details of another £270million of cuts.
‘Furthermore, I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the programme,’ he said.
Greek conservative party leader Antonis Samaras – a frontrunner to win elections in April – refused to sign a written pledge to implement painful spending cuts if he becomes prime minister.
Mr Samaras has suggested that he would rather renegotiate the terms of the austerity package thrashed out on Sunday night – much to the irritation of European leaders.
‘So far Samaras has not given a letter of commitment and this is a problem,’ said a source close to the talks.
European aides also said that last night’s meeting of the ‘euro working group’ – senior officials from eurozone finance ministries – was disrupted by a widening split over whether Athens can be trusted with a second bailout.
They have been lying about adopting austerity measures, but that doesn't seem to be working anymore. No one trusts them. With a lack of trust, they can't count on borrowing.
They will probably start trying to bully money out of the E.U.