Cyprus crisis could derail Greek recovery, industry lobby warns

(ATHENS) - The economic crisis in Cyprus and the "violent" solution imposed on banks could derail Greece's fragile economic recovery and undermine European cohesion, the head of the country's industry lobby warned on Wednesday.

"The Cyprus crisis and European uncertainty could cost Greece dearly," Dimitris Daskalopoulos, head of the Hellenic Federation of Enterprises (SEV) told a news conference.

"The success of the Greek recovery programme was already hanging by a thread... the recession is getting deeper in 2013 and recovery will not come in 2014," he said.

Cyprus absorbs some 9.0 percent of Greek exports and there are fears that the neighbouring island's brush with bankruptcy last month will hamper efforts in Greece to pull the economy out of a five-year recession.

"According to certain calculations (the Cyprus crisis) could remove up to a percentage point of (Greek) output," Daskalopoulos said.

In an interview on Monday, Bank of Greece Governor George Provopoulos had said the economy is expected to contract by up to 4.5 percent of output this year, with some 0.35 percent owing to the crisis in Cyprus.

The Greek industry chief also warned on Wednesday that "ad hoc" reactions to the European economic crisis dimmed the bloc's appeal to its own people.

"Berlin -- and by extension the EU -- appear to be reacting on an ad hoc basis every time a crisis breaks out, mainly persisting on austerity policies," Daskalopoulos said.

"This feeds euro-scepticism... and erodes the European ideal. Austerity is not an alternative vision for European people," he said.

In Greece, four unbroken years of cutbacks have increased anti-German sentiment but also swelled the ranks of a neo-Nazi and anti-immigrant group, Golden Dawn, that promises to end political corruption by mainstream parties.

"From 2009 onwards we are supposed to have given everything to safeguard our European future," Daskalopoulos said.

"But now, this future is an uncharted territory. Neither Germany, nor France, nor Italy really know what will happen from now on."

"The north must give and the south must change," Daskalopoulos said. "Otherwise, Europe's historic demons will find room to act again."