Impact of recent damage is hard to reverse, says IOBE

The Greek economy will sink back into recession at a rate of 2.5 percent this year, with unemployment starting to rise again after a year of decline, and consumer prices going up once more after three years of deflation, the quarterly report by the Foundation for Economic and Industrial Research (IOBE) said on Thursday.

In its forecast for the rest of 2015, the prestigious foundation noted the need for economic and political stability in the long term starting from early fall and warned that the negative effects of recent developments will be hard to reverse, while conditions for healthy growth will be absent as long as there is no confidence and balance in the credit sector.

Presenting the report titled “The Greek Economy,” IOBE Director General Nikos Vettas spoke of significant damage to the local economy, which having narrowly escaped the destructive impact of a disorderly default and eurozone exit, is now urgently seeking a new direction and course. The way to achieve this, Vettas said, is to adhere to the agreement with the country’s eurozone peers, adding that this should become a national cause and be implemented as early as possible.

Asked whether a Greek exit from the euro area remains a possibility, Vettas responded that “unless growth comes, the issue will remain alive.” He went on to warn that there are no “velvet divorces” in relations between the eurozone and a member-state, and that those who would benefit from such a development in the north of Europe and within Greece are far fewer than those who would suffer the consequences.

The report further forecasts that the lifting of restrictions to banking transactions can only take place gradually, following the return of confidence in the local credit system. These controls, along with the broader damage to confidence in the economy and the country will undermine Greece’s entire economic activity, it adds, with political instability increasing the risk of job and income losses.