The European Commission on Tuesday slashed its 2015 growth forecast for beleaguered Greece, while upgrading its growth outlook for the broader euro zone economy.
The commission cut its forecast for Greek gross domestic product (GDP) in 2015 to just 0.5 percent from a previous estimate of 2.5 percent amid political turmoil.
“Positive momentum has…been hurt by uncertainty since the announcement of snap elections in December,” the European Commission said in its Spring report. Greek voters went to the polls in January, electing the left-wing anti-austerity Syriza party to power.
“The current lack of clarity on the policy stance of the government vis-à-vis the country’s policy commitments in the context of the EU/IMF support arrangements worsens uncertainty further,” said the European Commission, which is the executive arm of the European Union.
Greece, which is weeks away from running out of cash, is in ongoing bailout talks with its creditors that have stalled on the issue of reforms.
An agreement with lenders on reforms could see Greece receive a vital last tranche of bailout aid worth 7.2 billion euros ($8.0 billion) that Athens needs to make loan repayments to the International Monetary Fund (IMF) and European Central Bank (ECB) in the next few months.