Greece is trapped in a ‘prolonged and severe depression’ and there is ‘a very strong possibility’ it will leave the eurozone, leading economists warn today.
The expected collapse in its economic output is likely to be even worse than that suffered by the United States during the Great Depression of the 1930s, says the National Institute of Economic and Social Research in London.
And unemployment is set to rise to 27 per cent next year with more than half of under-25s who want a job unable to find work.
Expected falls in gross domestic product will mean that by the end of next year the Greek economy will be almost a third smaller than it was at its peak in 2007.
The report suggests things may get so bad that the Greeks will ditch the euro and return to the drachma.
Expected falls in gross domestic product will mean that by the end of next year the Greek economy will be almost a third smaller than it was at its peak in 2007.
‘This is a prolonged and severe depression for Greece,’ said Jack Meaning, an economist at the institute.
‘There is a very strong possibility’ that Greece will leave the euro, he added. ‘It is a substantial risk.’
The warning came as shares in Greece’s crippled banks plunged around 30 per cent in Athens for a second day running.
The country’s stock market, which fell a record 16 per cent when it opened on Monday after a five-week hiatus, fell more than 1 per cent yesterday.
But after months of wrangling he was eventually forced to accept a tough new bailout deal – but only after the country’s banks were closed and capital controls imposed to save the financial system from collapse.
The lengthy negotiations, which fuelled fears Greece would be expelled from the eurozone and the strong-arm tactics of the lenders pushed the economy sharply into reverse.
Mr Meaning said: ‘The economy is expected to contract sharply again this year and next.
‘At this point the economy will be more than 30 per cent smaller than at its peak in 2007 and astonishingly seven per cent smaller than when it joined the euro area in 2001.
‘This is a prolonged and severe depression for Greece.’
