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Greek GDP dropped by 7% in the last quarter of 2011 compared to the same period of 2010, according to the national statistical service data. Recession for the last year is 6.8% of GDP with sharp increases in recent months due to the government crisis before the removal of George Papandreou as prime minister. At the same time, unemployment is approaching 20% or one in four Greeks is unemployed. The total number of people outside the labour market reached 1.04 million in November 2011.

The constantly shrinking economy of Greece makes it impossible to reduce the budget deficit, experts say. According to recent information, a special commission (Euro Working Group), which will examine how to optimize the rescue programme for the country, will meet in Brussels a day before the extraordinary meeting of Eurogroup. So far, the second memorandum provides for 100 billion euro financing of the Greek economy through payment of debt obligations by 2020 and another 30 billion euro are allocated for financing the banks affected by the PSI. It was planned within the debt haircut to exchange old bonds with new Greek government bonds, covering 35% and another 15% in guarantees (or funds from European countries) from the European Financial Stability Facility EFSF. According to "Kathimerini," the new offer is for the new bonds to European guarantees ratio to be 40% to 10% in order to save around 10 billion euro from the rescue programme for banks. They are necessary because it is believed that the Greek budget deficit will be higher than initially forecasted and the country will need additional funds, in addition to the 100 billion euro allocated so far.

The council of eurozone finance ministers is expected to meet on Thursday to finalize the preparation of the second bailout agreement and to give a green light to the exchange of old bonds with new ones of lower face value. According to "The Financial Times," Germany and the Netherlands have some doubts about the commitment of political parties to correctly carry out the measures stated in the agreement. This can slow down the process of granting the second bailout. The supervisory Troika report on Greece, which will present the sustainability of the foreign debt after the PSI, is expected to be presented during the meeting of eurozone finance ministers too.

There is some time until Greece receives the first tranche of the aid, and the spending of the cumbersome public sector is still serious. The Public Debt Management Agency held an auction today for quarterly bills, which raised 1.3 billion euro. The interest rate is 4.61%, which is a slight decrease of 0.07% from the previous auction of quarterly bills held in December 2011. The Troika calls for immediate cuts in operating expenses of public enterprises that are one of the biggest gaps in the Greek budget – their cost is high and they are often highly unproductive. Their wage costs should be substantially reduced - by 21.76% or 256.7 million euro in 2012 as planned. In other words, in 2012 wage costs in public companies will total 924.5 million euro as opposed to the amount of 1.18 billion euro in 2011. The Troika plans a total costs reduction of 13.9% or 616.5 million euro and a total revenue increase of 9.6% or 285.2 million euro.

One way or another, wages in public enterprises will be cut and very quickly in those companies that are already at the top of the privatization list. The government hopes to receive 19 billion euro revenue by 2015 from the sale of public enterprises, such as gasification companies, power plants, water supply companies, the state lottery and others. The privatization process is still at a halt, which is evident from the 2011 data. The year ended with only 1.7 billion euro revenues from privatization instead of 5 billion, as planned in the budget.