The projections of the Organization for Economic Cooperation and Development (OECD) for the Greek economy are particularly ominous.
According to OECD data which were released on Monday, the recession will reach 6.1% this year in Greece, against a forecast of 5.5%, further shrinking of the Greek economy by 3% in 2012 and an anemic growth of just 0.5% in 2013.
In 2012, unemployment will reach 18.5% and the budget deficit will rise to 7% of GDP.
In the OECD report, it is stated that the Greek economy fell deeper into recession in 2011, despite a recovery in exports, as the necessary fiscal adjustment was continued, leading demand to lower levels and raising unemployment.
OECD says that the economy will continue to shrink in 2012, while GDP is projected to begin rising in 2013 driven by broad structural reforms, strengthening external demand, improvement of competitiveness and increase in investment. “The substantial economic slowdown and high unemployment will push inflation to very low levels”, states OECD.
In its report, the organization calls upon the ECB to proceed with further relaxation of monetary policy and to design more radical emergency measures to rescue the Eurozone’s economy.
“The ECB must buy bonds and put a limit on yields, or a lowest limit in the value of bonds so that markets know that there is a contractor who is willing to negotiate at this level”, according to Pier Carlo Padoan’s statements in the Dow Jones Newswires.
According to the OECD, the ECB should aim to keep the interbank interest rate as low as possible to restore confidence.
The Agency agrees with the view that banks in the region need a large-scale recapitalization with EFSF resources, while, referring to the restructuring of sovereign debts through the ESM, it notes that they should be done on a voluntary basis.