Greece Debt Crisis: Country Stuck In Deep Recession, Confirming Impact Of Austerity

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GREECE DEBT RECESSION
A man stands with a candle, outside the 1870 building which had housed one of the capital's most loved cinemas, the Attikon, since 1916, during a rally against violence in Athens, Monday, Feb. 13, 2012. (AP Photo/Thanassis Stavrakis) | AP

ATHENS, Greece - The Greek economy remained stuck in a deep recession in the fourth quarter, according to official figures released Tuesday that confirm the painful effects of austerity reforms intended to lower debt.

Gross domestic product dropped by 7 per cent on the year in the fourth quarter of 2011, in non-seasonally adjusted terms, the Greek Statistical Authority said.

The struggling eurozone country has been shut out of long-term bond markets since 2010, and is surviving on rescue loans from European Union countries and the International Monetary Fund. But harsh austerity measures demanded in return for the emergency loans have hammered the economy.

Greece's economy has been in decline since late 2008, with successive quarterly contractions since then, with the exception of the first quarter of 2010.

On Tuesday, the Public Debt Management Agency said it had raised €1.3 billion ($1.7 billion) in an auction of 13-week treasury bills at a rate of 4.61 per cent — down from the 4.64 per cent rate from the previous sale of three-month debt on Jan. 17.

Parliament on Sunday approved a new round of austerity measures, slashing the minimum wage and planning mass layoffs in the civil service. The measures were demanded by the EU to approve a second massive bailout deal. Eurozone finance ministers, scheduled to meeting again Wednesday, also want Greece to detail how it will cover a remaining budget gap of €325 million ($428 million).

In Athens, government spokesman Pantelis Kapsis said the details would be worked out within the day.

"The money will come from spending cuts from ministries, from areas including defence," he told private Antenna television.

Dissent over the vote saw a junior coalition partner withdraw its support from the government, while the two remaining parties expelled 43 of their deputies in parliament for voting against the measures and six Cabinet members resigned in protest against the austerity.

Prime Minister Lucas Papademos on Tuesday described the vote as being of "historic" importance and indicated there would be no immediate Cabinet reshuffle — one of the ministers who resigned had been persuaded to stay on, while the other five would not be replaced for now.

Sunday's vote took place amid rioting in Greek cities that saw dozens of stores looted and burned.

The National Confederation of Greek Commerce on Tuesday said 153 businesses in Athens had been damaged, 45 of them destroyed — figures that are higher than initial police estimates released Monday.

More trouble was reported Tuesday in the western Greek town of Agrinio, where police said a group of about 50 youths smashed banks, storefronts and a post office before clashing with police.

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