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The Greek economy is expeced to recover in 2011, the Organisation for Economic Cooperation and Development (OECD) said on Thursday.The Paris-based organisation, in a report on the Greek economy, however, stressed this forecast was based on two main preconditions: first, that the new government would steadily proceed with structural changes needed and secondly, that an international recovery already underway in countries outside the OECD, particularly in Asia, will help.

    OECD acknowledges that an economic crisis hit Greece later and to a lesser extent compared with the average rate in other member-states. The organisation projects that Greek public debt would surpass 120 pct of GDP and the fiscal deficit will total 12.75 pct of GDP this year, attributing this development to the inclusion of public debts to suppliers, enterprises and hospitals to the state budget. OECD expects the Greek fiscal deficit to fall to 9.75 pct of GDP in 2010, thanks to temporary measures taken this year, but projected that the deficit would climb to 10 pct again in 2011.

    This figures "confirm the urgent nature of measures needed to be taken for a long-term restructuring of public finances," the report said, adding that these measures should focus on minimizing structural deficits, adopting more limitating fiscal rules and a more strict supervision of budget execution by an independent authority.

    OECD said it expected a sharp fall in economic activity by the end of 2009 and early 2010, with production activity falling because of lower demand, domestic and external, while lower revenues from tourism and sea transport would negatively affect exports. Investments, particularly in the building sector, suffered because of stricter lending conditions, while households' consumption suffrered from problems in the labour market and the financial system. The organisation projects that the unemployment rate would reach 10.5 pct in 2010 and projected a gradual decline by the end of 2011. The country's current account deficit was project at 10 pct of GDP. The inflation rate fell to an all-time low in 2009, but OECD said that a continuing decline in competitiveness was raising more hurdles in efforts towards recovery. Uncertainty over a recovery in Southeastern Europe was another determining factor for Greece's recovery.

    The Organisation urged the new government to proceed immediately with structural reforms in the fiscal sector, the healthcare system and the pension system, to promote reforms in the labour market to achieve more flexibility, to drastically cut public spending and to combat tax evasion with the aim to restore confidence in the economy in the short-term and laying the foundations for a more dynamic growth in the long-term.