Greece 'must move repair economy to avoid social crisis'

Greece's most influential think tank warned of a social crisis unless the government takes rapid action to repair the damaged economy.

Greece 'must move repair economy to avoid social crisis'

Greece's most influential think tank warned on Thursday of a social crisis unless the government takes rapid action to repair the damaged economy, including unpopular austerity measures.

It urged the socialist government to move faster in applying tough fiscal measures while its approval rating was high, to avoid public unrest later.

"Conditions require immediate action and drastic measures," said the IOBE economic think tank. "If the negative developments are not reversed ... the economic crisis risks becoming a social crisis."

The warning, made in an open letter to the prime minister, came as the government struggles to contain the worst economic crisis in decades, which is shaking the euro currency and was sparked by the biggest budget deficit in the euro zone.

Analysts have said that social unrest could pose the biggest risk to the Socialist government's efforts to cut spending -- Greece's two biggest trade unions are planning 24-hour strikes next month.

The country also remembers well last year's riots, when rioting sparked by the police killing of a teenager and fuelled by high youth unemployment closed sections of central Athens for several weeks.

IOBE said failure to repair public finances and boost the country's competitiveness would "lead the economy into a deep recesion and huge unemployment".

Unemployment rose to 9.8 percent in October from 7.4 percent a year earlier as the country faced its first recession in 16 years.

Vicious Circle

"The Greek economy is at a crucial turning point, having entered a vicious circle of high deficits and low competitiveness," IOBE said.

"The country's great dependence on external borrowing triggers suffocating pressures from international markets, the foreign press and our euro zone peers," IOBE added.

The European Union and rating agencies are putting great pressure on Greece to quickly fix the economy.

IOBE praised the government's Growth and Stability Plan, which includes cuts in welfare spending, tax reforms and savings on public sector wages.

"IOBE believes that the plan's credibility will be significantly reinforced by the immediate and decisive implementation of the announcements," IOBE said, adding that measures were also necessary to boost Greece's competitiveness.

Reuters
Last Mod: 22 Ocak 2010, 08:32
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