The European Commission slashed Greek economic growth and primary surplus projections yesterday and forecast deeper price falls and a higher public debt as a result of uncertainty that has dogged Athens policy direction since late 2014.

The Commission, which finished gathering data for its forecast on April 21, said it now expected the Greek economy would grow only 0.5 per cent this year, after 0.8 per cent in 2014 and accelerate to 2.9 per cent in 2016, unless policies change.

Three months ago, the Commission forecast Greece would grow 2.5 per cent this year and 3.6 per cent in 2016 after a 1.0 per cent expansion last year.

“The positive momentum, however, has been hurt by uncertainty since the announcement of snap elections in December,” the Commission said in its quarterly economic forecast.

“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,” it said.

Greece is in fervent negotiations with its international creditors to secure more loans in exchange for reforms as it quickly runs out of cash and faces the prospect of default.

Because growth will be lower, Greece’s debt-to-GDP ratio will be higher than previously expected. Instead of having peaked last year at 176.3 per cent of GDP, the debt will only have reached its highest point this year at 180.2 per cent of GDP, before declining to 173.5 per cent in 2016.