Greek Austerity

Greek industrial production fell 5.1% in April from a year earlier, worsening the 3.7% decline in March. The manufacturing sector measured year to year has contracted for 24 consecutive months and 27 of the last 28 months. The most recent back to back expansion was in November and December 2007. Monthly industrial production also shrank 3.8% in April after having risen 4.8% in both March and February.

The final GDP figures for the first quarter were revised lower to -1.0% from the -0.8% result released on May 12thby the Hellenic Statistical Authority. This equals the lows of the past decade which were also reached in the first quarter of 2009 and the first quarter of 2005. Yearly the Greek economy shrank 2.5% over the first quarter of 2009. This marks the fifth quarter in a row the economy has contracted. The government and the EU expect the economy to shrink 4.0% this year.

Unemployment is at a six-year high of 12.1%, and is likely to rise as government austerity plans severely limit spending in the second year of recession. The government of Prime Minister George Papandreou has promised a large reduction of the 13.6% deficit as a return for the EU loans that enabled Greece to meet its bond redemptions last month. Inflation was 5.4% in May, the highest in at least ten years as taxes have been boosted on fuel, alcohol and tobacco.

Joseph Trevisani

Chief Market Analyst

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