Greek Economy to Keep Shrinking

Wall Street Journal
October 3, 2011

Greece presented a 2012 austerity budget Monday that includes sharp increases in taxes and spending cuts amid a fourth year of recession and a deteriorating labor market.

In a copy of the draft budget, Greece said it expects its €220 billion ($294.51 billion) economy to contract 2.5% next year, after shrinking 5.5% in 2011, as a weakening economic outlook abroad adds to its domestic fiscal woes.

"The external economic environment is shaping up in 2012 to be less favorable than initially expected. Uncertainties continue to be large. For most developed economies, growth prospects appear less optimistic than six months ago while the debt crisis relates to a growing number of developed economies," the draft said.

Next year's contraction is expected to come on the back of a 3.8% drop in private consumption and a 4% reduction in investment spending, while unemployment is expected to jump to 16.4% from 15.2% this year.

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