BRUSSELS – The European Commission has joined Greece’s Finance Ministry in cutting growth estimates for the cash-crunched country closing in on an eighth year of an economic crisis, undercutting Prime Minister Alexis Tsipras’ rosy assertions all is well.
The Commission, part of the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) that is putting up 86 billion euros ($100.14 billion) in a third bailout, reduced the growth estimate to 1.6 percent from 2.1 percent six months earlier.
Greece has lost 25 percent of its Gross Domestic Product since the crisis began but Tsipras has crowed he’s brought a recovery, ironically by reneging on anti-austerity promises and whacking workers, pensioners and the poor with more brutal measures he vowed to reject.
The Commission’s estimate now is line with Greece’s which cut it from 1.8 percent, the financial news agency Reuters reported.
A year ago the 2017 budget had projected the economy would grow 2.7 percent this year, an estimate repeated by the Commission in February, on the condition that the second bailout review was completed on time.
But with the Radical Left SYRIZA leader Tsipras dragging his heels over more austerity before finally agreeing to more pension cuts and taxes on low-income families, cost Greece dearly, some 1 percent of the GDP of 167.13 billion euros ($194.6 billion).
The Commission expects the economy to grow 2.5 percent in 2018, but that’s dependent on Greece hitting fiscal targets it hasn’t managed yet and failure to do so would trigger automatic cuts as three bailouts of 326 billion euros ($379.58 billion) will expire at the end of August, 2018.
The adjustment also dampens enthusiasm a recovery is coming or that it will be sooner than hoped with fears that slow growth will hinder the economy for years.
Despite all that, the ministry and SYRIZA put out optimistic numbers again for 2018, predicting growth of 2.5 percent after saying it would be 2.4 percent, figures disputed by a number of analysts that it’s just not feasible.
If the recovery is slower than expected and fiscal targets aren’t hit, automatic spending cuts will be triggered, further injuring Tsipras’ popularity and SYRIZA’s standing in polls, which has been plunging since he went back on his word to help workers, pensioners and the poor.