Greek central bank in 'polarized' politics warning

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A lottery ticket vendor holds her stand in front of the University of Athens, Tuesday, Dec. 17, 2013. Greece's central bank has joined the government in predicting that the country's economy will grow in 2014 following a savage six-year recession but cautioned about the impact of a heated political rivalry ahead of elections in May. (AP Photo/Thanassis Stavrakis)

ATHENS, Greece (AP) — Greece's central bank warned Tuesday that a heated political rivalry ahead of elections in May could derail its prediction of the country emerging from a severe six-year recession in 2014.

In a 128-page report published Tuesday, the Bank of Greece predicted that the Greek economy will grow by 0.5 percent next year, in line with a government forecast. Though welcome, that level of growth will do little to make up for the 20 percent or more of economic output that's been lost during the recession.

However, it said a "polarized atmosphere" among political parties could limit the benefits generated from years of austerity that have seen an improvement in Greece's public finances — the country is soon expected to be running a so-called budget surplus, before debt interest payments are taken into account.

Over the coming few months, Greece's multitude of political parties, from left and right, will be gearing up for May elections to the European Parliament and local government. The run-up to the two general elections of spring 2012 was marked by rancor and widely seen internationally as a factor worsening the country's crisis.

"A serious problem is emerging with the polarized atmosphere of confrontation in politics, at a time when the opposite is required," the central bank said in its report.

"There is concern that this atmosphere may worsen ... heightening uncertainty and weakening the factors that are currently underpinning the positive outlook for 2014."

The traditional governing parties of Greece, the center-right New Democracy and the center-left Pasok, are currently in coalition but both have seen their support base dwindle over the past few years, dramatically so in the case of Pasok.

Two of the main beneficiaries have been Syriza, a coalition of left-leaning parties that is now Greece's main opposition, and the extreme right Golden Dawn party. According to an opinion poll on Monday, Syriza leads for the first time in over a year.

Syriza's leader Alexis Tsipras has vowed to try and topple the conservative-led coalition government with a strong election showing, arguing that austerity measures have failed and that the population of nearly 11 million cannot suffer any more financial hardship.

Unemployment is currently above 27 percent, while prices fell by 2.9 percent in the year to November, raising fears of a damaging deflationary spiral whereby consumers put off purchases in the expectation of lower prices ahead.

"The Greek people are enduring an unfair and barbaric austerity program that will not lead the country out of crisis," the 39-year-old Tsipras said Tuesday while commenting on his nomination by left-wing parties in Europe as a candidate for European Commission president.

The ruling coalition is Greece's third government since 2010, when the country lost market access and began relying on bailout loans worth a total 240 billion euros ($330 billion) from its partners in the 17-country eurozone and the International Monetary Fund.

The government is scrambling to meet key bailout requirements before the end of the year: To close around a dozen publicly run companies considered redundant, and receive parliamentary approval for a new property tax code and new regulations to protect distressed mortgage holders.

Parliament is scheduled to close Friday for the Christmas break.

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