UPDATE 2-Greek recession worsens in Q4, debt plan at risk

* Economy shrank more than expected by 0.8 pct in Q4

* Quarterly revisions spell deepening recession

* Data calls into question govt deficit measures

(Updates with quotes, background)

By George Georgiopoulos and Daniel Flynn

ATHENS, Feb 12 (BestGrowthStock) – Greece’s economy contracted more
than expected in the fourth quarter and downward revisions to
the rest of 2009 made its recession the worst since 1987,
threatening the government’s plan to set its finances straight.

With world financial markets focused on Greece’s efforts to
stabilize its 250 billion euro economy, the national statistics
agency said gross domestic product (GDP) contracted by 0.8
percent in the fourth quarter, far deeper than the 0.5 percent
forecast of a Reuters survey.

While other euro zone partners are shakily exiting
recession, the data suggested Greece’s downturn actually picked
up speed from a revised 0.5 percent in the third quarter,
casting doubt over government estimates of a return to growth in
the second part of this year.

“The Greek government’s (growth) forecast is far too
optimistic,” said Ben May of Capital Economics. “This is going
to be another factor making the fiscal adjustment Greece is
trying to achieve very difficult.”

(For a graphic on Greece’s GDP revisions click on
http://graphics.thomsonreuters.com/0210/GR_GDP0210.gif)

On a year-on-year basis, the economy shrank 2.6 percent in
the fourth quarter following a revised fall of 2.5 percent in
the third, which had first been put at 1.7 percent.

The sweeping revision showed Greek GDP contracted by 2
percent in 2009 as a whole, far below the government’s 1.2
percent estimate, making it the worst recession in nearly 30
years. Economists also said the latest in a series of changes to
data further undermined the government’s economic credibility.

“This renewed revision is not pleasant. Data revisions
happen often everywhere, but Greece is under the spotlight and
they should avoid doing too many of them in such a short space
of time,” said Burkhard Allgeier at bank Hauck & Aufhaeuser.

SHOCKING REVISIONS

The Socialist government shocked investors shortly after
winning power in October by revealing that its 2009 budget
deficit would be 12.7 percent of GDP, more than twice the size
indicated by the previous conservative administration.

Government pledges to cut this ratio by 4 percentage points
this year and below the 3 percent EU limit by 2012 hinge on
returning to solid economic growth.

Friday’s data, which coincided with worse-than-expected GDP
figures from some other euro zone countries, sent Greece’s stock
market and bond prices lower amid concern over its debt
troubles, which have spread to other euro members.

European leaders sought to prop up Greece with words of
support at a summit on Thursday but failed to offer concrete
proposals to help the country tackle its debt crisis, prompting
a negative market reaction. [ID:nLDE61A0W2]

Greece makes up just 2.5 percent of the euro zone economy
but is seen as representing a contagion risk for other states.

Economists said the data left Greece trapped between a rock
and a hard place, with the government’s deficit-cutting strategy
likely to plunge Greece further into a recession, which would in
turn weaken tax revenues.

“Fiscal tightening is likely to increase the downward
pressure on growth,” said Juergen Michels, economist at
Citigroup. “It’s not easy to get out of this difficult situation
that Greece is in right now.”

The downward revision to three sets of quarterly growth
figures may once again call into question Greece’s bookkeeping
as the government tries to rebuild its credibility with
financial markets.

Greece’s frequent statistical revisions have irked the EU
statistics agency and prompted legal action from the Commission.
Greece last revised GDP three months ago, to reveal the economy
had been in recession since the fourth quarter of 2008.

An NSS spokeswoman said the revision was due largely to
tourism statistics. Greece had said in September that
second-quarter tourism sales increased 15.7 percent year on
year, but it revised this to a 4.6 percent contraction.

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UPDATE 2-Greek recession worsens in Q4, debt plan at risk