Greek recession complicates rescue efforts

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Greek recession complicates rescue efforts

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The drastic steps taken by Greece to get out of the red may not be enough.

Athens latest budget figures showed the economy will remain stuck deep in recession next year.

That underscores the challenge finance minister Evangelos Venizelos faces in creating enough growth for Greece to claw its way out of the debt crisis that is undermining the euro.

After shrinking by an estimated 5.5 percent this year, the economy is predicted to fall 2.5 percent in 2012.

Unemployment continues to rise and is forecast to hid 16.4 percent of the workforce next year.

The 2011 budget deficit will a much higher than forecast 8.5 percent and Nikos Christodoulou, an analyst with Merit Securities, explained it will be problematic: “This (deficit) is a great, a significant, deviation from the originally target which was 7.6 percent. The recession widens in Greece at this moment and we may have a new recession in the next year, so the bigger the recession the higher the budget deficit.”

The problems is Greece’s economy will no longer grow next year as was anticipated in the original rescue package calculated by the experts from the EU, International Monetary Fund and the European Central Bank.

And growth is a key factor in determining whether the debt is viable or whether Athens will have to default.