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Monday, August 12, 2013 5:50 PM

Finding Hope When It's Hopeless

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The New York Times reports Greek Economy Shrinks for 20th Straight Quarter

The Greek economy posted its 20th consecutive quarterly decline in the three months through June, government data showed on Monday, but a slower pace of contraction provided a glimmer of hope for beleaguered Greeks.

Gross domestic product shrank by 4.6 percent in the second quarter compared with the same three months a year earlier, the official Hellenic Statistical Authority said. That was an improvement from the first quarter of 2013, when the economy contracted 5.6 percent compared with a year earlier.

Ben May, an economist in London with Capital Economics, said the latest number was “encouraging, as it looks like the quarterly pace of decline is slowing.” An analysis of the second-quarter figure suggested that G.D.P. might have ticked up by about one-tenth of a percent from the first quarter, he said.

“The troika’s forecast for a 4.2 percent annual decline in 2013 looks achievable,” Mr. May said.

But it remains “plausible,” he said, that the Greek economy will continue shrinking into 2015. He forecast a 2 percent decline in G.D.P. for next year, followed by a 0.5 percent contraction in 2015.
Illusion of Hope

Allegedly GDP improving from negative 4.6% to the target of negative 4.2% provides a glimmer of hope.

Please be serious. This is what the Greek unemployment rate looks like.

Youth unemployment is about 65%. Let's assume the Greek economy improves steadily over the next two years and by 2015 Greece does even better than expected and achieves 0% growth.

Three Questions

  1. Can Greece suffer through another two years of rising unemployment and stay committed to the Euro?
  2. What will the unemployment numbers look like in two years?
  3. How fast will the unemployment rate drop when growth does return?

Hope is an illusion provided by economists who think Greece should stay committed to the Euro even as the cancer of unemployment spreads and numerous structural problems remain unsolved.

Mike "Mish" Shedlock

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