Tuesday, 24 January 2017

Greek living standards crumble

Greek living standards are crumbling as the government and its creditors seem deadlocked on how to implement the next round of austerity measures.

A report by the Labour Institute out today says that 37 percent of Greek households subsist on less than €10,000 a year.

Three quarters of all households saw their income fall last year, according to the Institute, a think tank belonging to the National Confederation of Greek Labour, the private sector’s labour federation. Fully one half depends on a pension as its main source of income.

These findings come days after the labour ministry revealed that one in five workers is employed part-time, while one in ten earns under €600 a month.

Unemployment seems stuck at 24 percent after a high of 28 percent in 2013, with over a million people out of work.

The latest austerity measures, voted in last year, include higher sales tax and higher social security contributions. These have hit the self-employed and sole traders hard, but the hardest hit of all are farmers, for whom these measures have coincided with higher income tax plus elimination of benefits such as subsidised diesel and reduction in European Union subsidies. This week farmers took to the highways in their tractors to protest that the new measures are too much for them to absorb all at once. 

The government is also under pressure from creditors to implement further cuts to public spending in order to produce a 3.5 percent primary surplus next year. That is the amount of money left over to pay creditors, once domestic needs have been catered to. The International Monetary Fund does not believe the current budget cuts will achieve this.

The Syriza government has been trying to pry the IMF loose as advisor and observer of its adjustment programme, and deal only with its European partners on political terms rather than the IMF’s purely economic criteria. The powerful German finance minister last week clarified that without the IMF there would be no programme.

European finance commissioner Pierre Moscovici said today that Greece will not close its second assessment at this week’s Eurogroup meeting. The optimistic scenario is that it may conclude by February 20. After that, however, with elections coming up in major Eurozone economies (France and Germany, possibly Italy and Spain) this year, a speedy conclusion seems increasingly unlikely.

Greece is bullish on one count – its tax revenues are above expectations for 2016. The finance ministry reports today earnings of €54bn last year, €1.68bn above target. This helps to give the state a primary surplus of €4.4bn rather than the target 1.98bn. Questions remain, however, as to whether this is sustainable on the back of an economy which is seeing close to zero growth and falling worker incomes.  

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