It looks like Greece is going to have a worse year than initially thought. Lenders had predicted back in March that the Greek economy would shrink by 4.8 percent. That estimate has been revised to 6.5 percent.
The Greek government predicts that the economy will shrink only 3.8 percent, while the Greek central bank predicts a 5 percent contraction. None of these figures are good news for eurozone recovery.
Greece is weeks away from defaulting on its debtand possibly leaving the eurozone. The bailout that the Greek government is seeking is dependent on austerity measures that have proven very unpopular.
Inspectors from the “troika” are sitting down with Greek officials today. From the Wall Street Journal:
Inspectors from the European Commission, IMF and ECB, also known as the troika, return to Athens Monday after a 10-day break where they will meet with Finance Minister Yannis Stournaras at 1100 GMT to weigh up the austerity package finalised by Greece's three coalition party leaders last week.
The latest package includes 10.5 billion euros in spending cuts and 3 billion euros in higher taxes, according to government officials. Of the spending cuts, 6.7 billion euros will come from pensions and public-sector salaries and bonuses, while an additional 3.8 billion euros will come from government operating expenses.
The spending cuts in the package envision raising Greece's retirement age to 67 from 65 currently; cutting two extra-month bonuses now paid to public servants and retirees; cutting wages to uniformed personnel by 12% on average; cutting pensions above 1,000 euros a month by up to 10%; and reducing other supplemental pensions.
As bad as things are in Greece, the economy of Spain is shifting attention West. It is looking increasingly likely that Spain will request a bailout, despite what at least one German politician thinks:
German finance minister Wolfgang Schaeuble has said Spain is taking all the right steps to overcome its fiscal problems and does not need a bailout, arguing that investors will recognise and reward Spanish reforms in due course.
Unemployment in the eurozone is at a record high, France is looking at a depression, and Greece is looking worse than already expected. But the politicians have this continental crisis under control, right?