ATHENS (Reuters)

ATHENS | Tue Nov 15, 2011 6:25am EST

ATHENS (Reuters) - Greece's economy slowed its steep slide in the third quarter but still shrank 5.2 percent from a year earlier as the debt-choked economy continued to plummet in a recession that looks set to head into a fifth year.

The drop was mainly the result of huge wage and pension cuts, job losses, and tax hikes imposed under an international bailout aimed at stabilizing Greece's crumbling public finances and saving the country from bankruptcy.

The measures have pared down the size of bloated public sector costs that have driven public debt to more than 160 percent of annual output, pushed unemployment to a record 18.4 percent and hammered wages, crushing domestic demand.

The third quarter figures, which included downward revisions to data from the first half of the year, did nothing to contradict forecasts that the Mediterranean state will enter a fifth year of recession in 2012.

Greece and its international lenders expect an economic contraction of 5.5 percent in 2011, but that number is based on seasonally adjusted data that does not compare with Tuesday's unadjusted results.

"A significant improvement appears unlikely in the fourth quarter given the deteriorating conditions in main trading-partner economies, weak domestic sentiment and new austerity measures that have been in effect since September," said Plato Monokroussos, an economist at EFG Eurobank.

"The lack of seasonally adjusted data has complicated the derivation of full year forecasts, but it appears that the pace of real GDP contraction in 2011 should be around -5.5 as forecast."

The data came alongside reporting from the rest of the 17-nation euro zone, which grew by 0.2 percent when compared with the previous three months.

German and France, the euro zone's two biggest members, grew 0.5 percent and 0.4 percent, respectively, but stagnation in Spain and a contraction in the Netherlands were among signals that worse is to come due to the debt crisis and falling consumer confidence.

The Greek figures included revisions to earlier reported numbers for the first half of the year.

Second quarter gross domestic product was revised down to a 7.4 percent decline, from 7.3 earlier, and first quarter decline worsened to 8.3 percent, from 8.1.

The revisions came on the back of a change in reference year to 2005, from 2000.

The European Commission expects an overall contraction of 15 percent during the entirety of Greece's crisis. The 220 billion euro economy began shrinking in 2008 and is expected to grow again only in the last quarter of next year.

(Reporting by Renee Maltezou; writing by Michael Winfrey; editing by Patrick Graham)