Bloomberg News

Default Talk, New Austerity Hurts Greek Economic Confidence

October 06, 2011

Oct. 6 (Bloomberg) -- Greek economic confidence declined in September as the government announced additional cuts to pensions and wages amid heightened concerns the country would default.

An index measuring short-term confidence among households and businesses fell to 70.6 from 73.7 in August, the Athens- based Foundation for Economic & Industrial Research said in an e-mailed report today. Consumer confidence dropped 2.4 points to minus 73.6, it said.

Business expectations “remain adverse in all sectors while consumer confidence reflects the intense pessimism at the present and future economic juncture,” the foundation said.

Prime Minister George Papandreou presented a 2012 budget with 6.6 billion euros ($8.7 billion) of extra savings this week as the government struggles to convince international creditors it can meet targets for receiving an 8 billion-euro loan instalment, originally due last month, needed to avoid default.

Greeks will be asked to pay a new property tax on all homes owned, while public-sector workers will see their salaries cut by a further 20 percent on average and pensions reduced by 4 percent. The plans also include moving 30,000 state workers into a labor reserve system that will mean reduced pay and eventual dismissal. The economy is now forecast to shrink 5.5 percent this year and 2.5 percent next year, according to the budget.

--Editors: Andrew Atkinson, Eddie Buckle

To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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