Nevertheless, carry-over from 2012 as well as the ongoing fiscal consolidation are projected to result in a further contraction of 4.4% of GDP in 2013. Investment is likely to continue underperforming in the short-run, as the majority of businesses still face liquidity constraints or wait to see more evidence of a pick-up of the economy. Though exports are projected to grow as the economy is improving its competitiveness, they are likely to remain subdued due to still weak external conditions. It is expected that these factors will continue to dominate for most of 2013, only partially compensated by the reversal of the liquidity squeeze, notably as the government plans to repay arrears for an amount of up to 4% of GDP. In line with this contraction in demand, the unemployment rate is now expected to peak at 27.0% in 2013.

The return to positive quarterly growth rates by end-2013 will be followed by positive full-year growth of 0.6% in 2014. This reflects ongoing positive supply-side developments. Reductions in unit labour costs (due to far-reaching labour market reforms) and product market liberalisation are expected to create new business opportunities and to encourage job creation once the economy picks up. In addition, the bank recapitalisation process and the overall stabilisation of the country are setting the preconditions for a return of capital to the country and renewed credit flows to the private sector. With a large part of the fiscal consolidation effort already legislated, consumers and investors appear to start regaining confidence which should strengthen domestic demand in 2014. Unemployment is nonetheless forecast to remain elevated at 25.7%.

Greater flexibility in wage bargaining arrangements drives the forecast for decreasing labour costs. Compensation per employee is projected to fall by 7.0% in 2013 and by 2.0% in 2014. Together with the effect of structural reforms in the product market, this is expected to translate into HICP deflation of 0.8% and 0.4% respectively in 2013 and 2014, leading to a significant inflation differential vis-a-vis the euro area average. This improvement in competitiveness, combined with euro-area recovery, should lead to export growth. The current-account deficit is expected to decrease from 7.7% of GDP in 2012 to 4.3% in 2013 and 3.3% in 2014.

In 2013 the government aims at primary balance followed by a primary surplus in 2014. This is supported by a package of savings measures amounting to 7.2% of GDP over 2013-14, which was adopted in November. Given interest payment reductions of almost 1% due to the debt-reducing measures adopted by the Eurogroup in late 2012, the overall government deficit in 2013 is now expected to be 4.6% of GDP. The structural balance is estimated to reach a surplus of 13⁄4%. Gross public debt is estimated at 162% of GDP in 2012, 15% of GDP lower than in the autumn 2012 forecast, mainly thanks to the debt buyback operation carried out in December 2012. The debt ratio is projected to increase to 176% of GDP in 2013 as the economy contracts, after which it is expected to fall at an accelerated pace, supported by an improving budget balance and stronger nominal GDP growth…”

The two largest unions of the country, ADEDY and GSEE representing together about 2.5 million workers have called for a nationwide strike bringing the country to a standstill. The strike will affect public and private sectors as well as doctors, lawyers, teachers, port employees and seamen. Hellenic Railways (OSE) and suburban rail lines will be on a 24-hour strike. Buses in Athens will run only between 9 a.m. and 9 p.m.

In a statement GSEE said the strike was the answer to the austerity measures that have made the life of workers difficult and plunged the economy into recession and crisis.

Since 2010, Greece has relied on bailout loans from other eurozone countries and the International Monetary Fund. To continue receiving these loans, the Greek government has cut the salaries and pensions of workers, stimulating many strikes and demonstrations.

This latest 24-hour general strike comes ahead of an audit by Athens’ international creditors scheduled for next week. The outcome from the audit will determine whether the country will receive its next installment from its international creditors, which is due this month.

Meanwhile, a visit by French President Francois Hollande in Athens on Tuesday went largely unreported as Greek journalists were on strike.

During the brief meeting, Papoulias told the French president that the Greek people’s tolerance for more cutbacks and sacrifices has been exhausted, warning of a possible “social explosion” if more pressure is exerted on the people. In his reply, Hollande said he did not arrive to demand more sacrifices from the Greek people. He also stressed the importance of Greece remaining in the Eurozone, and that a return to the drachma “would have been a catastrophe … the Eurozone crisis is over, the economic crisis continues…” AMNA reported.

At the same time, government said yesterday it would not fire almost 1,900 civil servants earmarked for possible dismissal, despite promising foreign lenders it would seek to cut the public payroll, Reuters writes.

Unemployment is expected to reach 30 percent this year,  according to a study by a government funded research agency published last week.

Current government coalition has been a possibility even before the votes were counted on the night of June 17. And as most analysts admit, elections were won due to fear tactics explored by old politics. Samaras, Venizelos and Kouvelis, after failing to agree in May, they got a second chance in June to form a government that should be willing to sacrifice itself to save the country.

In troika’s mind, there was only one path: to follow the Papademos’ government way. However, this was something Greek voters pledged the new government to avoid. When they heard the right-wing rhetoric built around the ‘MoU re-negotiation’ concept, they thought they did it. When Antonis Samaras promised to renegotiate the infamous Memorandum, voters saw an opportunity to combine austerity relief with the conservative, safer approach of ND. So they ditched the radical vote, doing Alexis Tsipras a favor, who, in reality, hoped to spend sometime in the opposition before getting serious with the country’s core politics.

By voting for old politics, Greeks decided to stay in familiar waters and refrain from exploring the uncertainty of the new. Besides, a 3-year austerity made people weaker, placing them closer to the indifference threshold.

Unfortunately or not, voters were spared with the technicalities. Pre-election rhetoric was based on the magic word of ‘re-negotiation’; a handful of columnists and politicians who really explained the fallacy were swamped by partisan juxtaposition. On election night, the new Prime Minister already abandoned the strong campaign word and started talking about ‘amendments’ that would be put into effect sometime during the 4-year period of governance and, most importantly, they would be received as a ‘bonus’ for playing the predetermined austerity cards right.

This is how a government can screw up political communication strategy (if any) overnight. Hardcore Samaras’ associates will probably say that communication is not that important, since what matters is real structural changes. Wrong. In times of crisis, people are disoriented. If you do not package your politics right, you are finished, especially in Greece, and particularly when you are a conservative leader running a coalition scheme supported by the socialists and the left.

From the moment the coalition is once again messing around with pensions, salaries and social benefits (namely horizontal measures) the pistol is cocked and the trigger is about to be pressed. Is people’s new disappointment enough to break a government? Probably not, but if the opposition manages to give meaningful words to social discontent, then breaking a link would be enough to unlock the administration and take it down; not noisily on the streets of Athens, but in the chambers of strategic politics.

The survival of the government depends on a really weak link held by PASOK leadership and this weak link is about to crack for a variety of reasons.

First of all, despite all the laws and measures passed in the past, most people consider the attack on household income a fresh piece of government policy. Being under the bankruptcy threat is no longer a strong argument; it was burned out during the Papandreou years.

The government’s vagueness about the new austerity measures continues the fear tactics, making things even worse. This alienates voters even further from the old political system, whose leftovers were used to form today’s government coalition. In simple terms, those who initiated fear and presented themselves as citizens’ protectors quickly failed on their promises and once more engaged fear as a tool to bail themselves out of the pressure.

When you need cash fast, is there any other alternative than cut spending from the source? Probably not, but why lie to the people? Was it the result of amateur political spinning or a failure of leadership to assess reality?

And this brings us to coalition’s inner politics. Old PASOK and Venizelos are in a down slope (sources say that a new formation is under way by key PASOK people) and Kouvelis is already experiencing an identity crisis and is in no position to play a role without the intermediary socialist link. This could crack the government in no time.

But still, a triggering event is required to make things roll that should be about the people (and not about partisan relations) and would put the coalition in a real unity test. In my view, this grassroots event is already scheduled in the political agenda for late August or early September and has nothing to do with troika’s wises.

It will be genuinely about the people and for the people.

This is the new draft bill for the relief of over-indebted households from loan obligations, tabled by SYRIZA to be discussed when the Parliament returns from the summer break.

Tsipras’ political argument is simple and involves hundreds of thousands of households that saw their budgets flattened by the crisis, due to unemployment or massive reduction of income. This policy was included in Antonis Samaras’ speeches during the pre-election period, but nothing is heard ever since.

The technical argument is that the banks are making up the losses from bad loans through their recapitalization from the Credit Stability Fund. At the same time, the banks continue to demand the repayment of the delayed installments, regardless of the fact that those loans have been classified as bad debts and are taken into account by the recapitalization.

In plain talk, those who will disagree with the bill would sound like asking Greek people to pay the banks twice for financial management failures of the past: first, via national borrowing for recapitalization, and second, from their own pockets for bad personal loans.

So, who is going to disagree with Tsipras’ proposal and on what grounds? In terms of political communication, this move is an absolute winner. It could rule the agenda and meddle beautifully with the new austerity measures the coalition government is about to announce; furthermore, it corners the coalition government politically, and challenges MPs (through a catalogue name vote) on an individual as well as collective level.

Conspiracy advocates could say that this is planned between the Premier and the main opposition. If this is not the case, New Democracy will have to react, PASOK and Democratic Left will have to take sides; MPs individually will have to do the same. This could prove to be a unique moment in Greek politics, gathering an across the board agreement, or the trigger in question, ending up being a win-win for the centre left.

It could also make Antonis Samaras the Prime Minister serving the shortest term in modern Greek history and turn Alexis Tsipras into the youngest one, ever.

Dr. Demetris Kamaras is the Editor of Alyunaniya.com

According to protothema.gr, some of these measures are: cuts (12%) of special payrolls for judicials, academics, state doctors. Amount saved could reach EUR 1 billion if the measure includes military personnel, although the government is looking for an alternative equivalent measure; additional pension cuts of EUR 300 million; EUR 500 million cuts in pharmaceutical costs of insurance funds; privatizations of Popular Lottery SA (Laika Lacheia), IBC Olympic venue, DEPA and DESFA, which could bring over EUR 1 billion euros by the end of the year. If Elliniko is sold too then the final amount may be considerably higher.

The Finance minister said the troika will return to Greece on July 24 and the Greek government will discuss the possibility to replace some measures with others of an equivalent effect, in terms of deficit impact.

EU Council, in its recommendation on Greece argued, inter alia: “…The release of the tranches is based on compliance with quantitative performance criteria and a positive evaluation of progress made with respect to the policy criteria laid down in Council Decision 2011/734/EU of 12 July 2011 addressed to Greece with a view to reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive deficit1 (as amended on 8 November 20112 and 13 March 20123) and the Memorandum of Understanding on Specific Economic Policy Conditionality, which was signed on 14 March 2012…”

Speaking to reporters after the meeting of the EU finance ministers, FinMin Yannis Stournaras said that his eurozone colleagues were inflexible concerning the implementation of measures in Greece in 2012. According to ANA, he confirmed that he did not submit a request for an extension to the country’s bailout program, expressing his confidence that “when the time comes (the request) will be made”.

In an interview with CNBC in Brussels, Stournaras said no decision on the matter had been taken at Monday’s meeting of euro zone finance ministers, because it was still unclear what such an extension would mean in terms of financing for the country.

“They [the troika] ask us to bring the program back on track before anything else. So the situation is quite difficult, it’s not easy,” Stournaras told CNBC. He believes that, “privately,” everybody accepts that an extension is reasonable. “Certain difficulties, which we should clarify with the troika in the weeks to come. So we definitely have indicated that we are going to raise this issue,” Stournaras said. He expected a decision “towards the autumn.”

The Greek economy contracted sharply in 2011 due to strong fiscal retrenchment, severe economic dislocation and weak exports. Unemployment has risen rapidly, especially among the young. Output is set to decline further until the second half of 2013 when the pace of fiscal consolidation is expected to ease somewhat, wide-ranging structural reforms to boost competitiveness and promote investment start to bear fruit, and international demand strengthens. These projections assume that the EU/IMF programme of fiscal consolidation and structural reform is fully implemented.

The economic adjustment programme approved in March 2012 gives Greece time to proceed with the fundamental reforms it needs. It should be implemented rigorously to restore growth and stabilise the public finances.

According to OECD Outlook, the global economy is, once again, trying to return to growth, helped by a modest pick-up of trade and an improvement in confidence. It is doing so, however, at different speeds, with the United States and Japan growing at a stronger pace than the euro area and large emerging economies enjoying a moderate cyclical upswing. Different dynamics are also developing in labour markets in the United States, where unemployment is slowly decreasing, and in the euro area, where instead it keeps rising.

OECD noted: “Almost five years ago, in the summer of 2007, turbulence in the US subprime market sparked off the most dramatic financial and economic crisis in several decades. After five years we cannot yet say that the crisis is behind us. More than once signs of recovery have disappointed. Policy mistakes have been made, sometimes reflecting inaccurate reading of events, at other times reflecting policy and political failures. Is it different this time? As long as confidence is not rebuilt on a solid basis with the right policy choices, downside risks will prevail. This is important everywhere but particularly so in the euro area, where crisis management goes hand in hand with the building of the institutions needed for a monetary union to work properly.”

In a presentation titles “Lessons from the Greek Debt Exchange:, at the Institute of International and European Affairs in Dublin, Institute of International Finance (IIF) chief Charles Dallara argued:

“We should understand in my view having spent a lot of time in Greece over the last 9 months, that what we are seeing there is not just an expression of frustration by the Greek people about quote austerity, but by an expression of frustrations of what they consider to see of 3 to 4 decades of really inadequate political leadership that has led them to this position, my sense, and I certainly don’t want to speak for the Greek people, but I’ve talked to a lot of people, and I had the privilege to live in Athens for two years a young naval officer so perhaps I feel I have my own touch of Greek roots, and my sense is that there is a profound sense of disappointment at where their political leadership from both the common parties that have guided them for most of the last decades has left them.

And a determination to seek new directions, by either new parties new leaders, or through the leaders of the old traditional parties trying to convince the Greek people that they see a way forward, and I think it’s going to take some time for this to shake out to allow the Greek democratic process to run its course. And I think it is incumbent on the rest of us, and that would include other European leaders, to pause in what has been a very popular game of how to tell the Greeks how to run their lives.”

Rompuy referred to four basic needs for businesses: ideas, an innovative environment, especially in industry, people, with all sorts of skills and abilities, capital, to finance investments and markets, to sell and to source. These are “at the heart of Europe’s growth strategy. Innovation and research, bank credit and venture capital, labour markets, international trade…” he said, adding a fifth key need: stability. “Political, social, economic and financial stability. It is a precondition for the four others, the basis of confidence and a core function of Government.”

Rompuy stressed: “…fiscal consolidation is not an objective in itself, it is a prerequisite for sustainable growth. Structural reforms remain the main lever at our disposal. Their effects are not immediate nor can they be, but they will make a difference over time, and create jobs in due course. We must tell the truth. There are no magic formulas. Reforms take time and so does their impact on growth and jobs.”

“…Europe needs structural economic growth, and we can deliver it… This is the highest priority for European leaders, and we are working in close contact to make it happen. We will be meeting again in June within the European Council to take important decisions and I do not exclude convening an informal Leaders’ dinner at an earlier date for an open exchange of views on how best to prepare matters for June,” Rompuy noted.

“We have to engage in the battle of ideas. Fiscal consolidation does not just equal momentary austerity. It also means investing in the future. It is an exercise in making the right, future-oriented choices. Cuts and taxes need to be fair. Even a growth policy needs choices and sacrifices, but these should not be borne by one social group or generation. Some create the impression (or the illusion) that a growth policy is easy. This is not at all the case. It is a moment of truth. We have to shape change, otherwise it will be imposed on us.”

“There is still a lot of work to be done,” the IMF chief said of Greece, while praising interim Prime Minister Lucas Papademos for his work since November, media report.

According to an IMF transcript, Lagarde said: “We spent in the last six months an inordinate amount of time on Greek issues, on the Greek new programme, and in discussions with the Greek authorities. A lot has happened in Greece… Many things: change of government, change of approach by many of the partners on the ground, and clearly a new Prime Minister who is taking his task very seriously. A lot has happened in terms of implementation, because all the preconditions that we had identified, together with the other members of the troika, were implemented. Laws were passed.”

Lagarde stressed: “implement, implement, implement, paying tribute to the Greek people who share and bear the burden and make the sacrifices that we know of. I would call on those that are not sharing that burden that are not bearing it, to actually do so. If there is one area where more and better work needs to be done, it is in revenue collection, in the tax collection efforts, where more work needs to be done.”