Dr. Vassilis Korkidis

Greek households, businesses still face barriers

Flickr/taver/CC BY-ND 2.0
Syntagma Square, downtown Athens, Greece.

As an SME employer, I try to understand the IMF’s recommendations and the German statements for the four-year “post-memorandum” period in Greece, which to me would seem to prove equally difficult with the previous eight-year period of the three memoranda since 2010.

First of all, starting with the level of the wages, I note that Eurostat at the minimum wage level displays Greece in the second zone of the EU countries along with Portugal (€ 667), Malta (€ 748), Slovenia (€ 843) and Spain (€ 859) calculating the minimum wage in our country at 683.76 euros, dividing the annual income to 12 months and not the salary of 586 euros in 14 months due to gifts and allowance. This is not exactly correct. Informally, the EU’s highest minimum wage is currently EUR 1,999 when the average salary in Greece in 2017 in the private sector was EUR 929 and in the public sector EUR 1,050. According to recent IKA / EFCA figures, wage changes are not only worse since 2009, but also since 2014, after three years of low wages have tripled over the last three years. Well-paid jobs that are lost are replenished with low pay rates ranging from 600-800 euros gross. The insured persons who are paid up to 600 euros today are 673,000, representing 34% of the 1.980.460 employees in Greece, when in 2014 they were 31% to 530.000 and in 2009 only 14% to 239.000 employees. Unfortunately, an increase of 14% in 2017, from 4% in 2009, is recorded for those who survive with a salary below the poverty line and a monthly salary of 300 euros. Figures presented by IOBE in its latest report show that the average salary in the private sector ranged from 884 to 1,054 in 2008, down 16.1%, or 170 euros. Similarly to the public sector, the decrease is higher, reaching 25.8%, with the average wage in 2016 rising to 1.077 euros, from 1,451 in 2008 (374 less). As for wages in DEKO, the average salary in 2016 was in the range of 1,270 from 1,549 euros in 2008 (-18,1%), in private and public sector legal entities to 1,047 from 1,378 euros, while in local government organizations at 925 from 1,192 euro. In addition, the IMF seems to ignore 36% of Greeks living in poverty when in the Eurozone is 23%. It forgets that despite the famous labor reforms, Greece is a lag in employment with unemployment at 21% 9% in the Eurozone. Youth unemployment at 44% against 19% in the Eurozone and the long-term unemployed to 71% compared to 48% in the EU, this year reaching historically high employment with a record 238 million and 71%, while employment in Greece ranges in 58% of its population. The large gap in the EU in terms of increasing incomes and improving the social situation of citizens compared to Greece, where the loss of income that has occurred to those who work today is from 22-32%, does not seem to be moving. Finally, when the added value of the domestic private sector declined by 38% between 2008 and 2017, compared with an increase of 19% in the EU and the total turnover of commercial enterprises from 54 billion euros has fallen to 35 billion euros. When real estate has lost its commercial value by -45% and the biggest heir is the Greek State, since in 2017 the inheritance waivers exceeded 135,000. When households spent 8.3 billion euros of their deposits to buy basic living goods and to pay 9 billion more than their annual income. When we work 6.5 months a year to pay our taxes, then all I can say is that the IMF “Memorandum” Report does not provide solutions to our timeless problems. As for Merkel’s statements that the effects of the program do not end the other month, it will add even in the years to come, since even stagnation is a threat to the Greek economy. I think it is very premature for the SMEs in the market to see solid development and it will be a tragic mistake to conclude that our worries have hardly gone through since the real economy has shown signs of improvement in some sectors but is certainly still vulnerable to internal and external risks.

Let see the following chapters of the Greek society and economy their capabilities during the next framework period of 2018-2022 and their starting point situation:

Households in despair

A mix of tax, debt, unemployment, low wages, and the inability to acquire basic goods and services has despised Greek households, making everyday a survival struggle for a significant proportion of citizens. Greeks are now among the poorest citizens of the European Union, having since the outbreak of the economic crisis undergone a rapid decline in their living standards.

According to Eurostat data, between 2008 and 2017, the living standards of Greeks deteriorated dramatically. It is indicative that nominal expenditure per capita in Greece declined from € 17,008 in 2008 to € 12,929 in 2017, down by 24.4%. At the same time, the per capita GDP of the country reached 67% of the EU average, while real private consumption in the past year remained at 23% below the European average. And Greeks may be the poorest Europeans, but in 2017 Greece ranked 17th most expensive country in the EU, as successive increases in excise duties and VAT triggered prices in a range of goods and services with a direct impact on the household basket due to of their shrinking income. As shown by the latest study by the Athens University of Economics and Business on consumer behavior, the cost in the average monthly basket at the supermarket fell to 278 euros from 332 in 2012, meaning it lost 54 euros in a five-year period.

Enterprises in a deadlock

However, this situation in Greek society also has chain reactions to the market and businesses, which see their sales fall steadily, with thousands of businesses already having a padlock and thousands of jobs lost, as the total turnover of commercial of EUR 54 billion has been settled at EUR 35 billion. At the same time, the economic hardships faced by households and businesses cause many to be unable to meet their basic obligations. For example, thousands are consumers who have paused payments, with household and business debts only to PPC being over € 2 billion, private debt to the state over € 105 billion and debt red loans to households and businesses to banks are over 95 billion euros. Business loans of 60 billion euros will be violently restructured and sold at 30% of their value, with the result that in the next three years we will see many Greek companies changing their hands.

Income is falling and tax is rising

All this is fully awaited if you look at the reduction in wages and pensions in Greece, at the same time as unemployment is at 20.2%, according to the latest data from the Hellenic Statistical Authority, while taxation has now become a loophole in the neck of households and businesses. Data presented in latest report on Education and Labor in Greece: Impact of the Crisis and Challenges, show that in 2016 the average salary in the private sector ranged from 884 to 1,054 in 2008, down 16.1 %, ie 170 euros. Similarly to the public sector, the decrease is higher, reaching 25.8%, with the average wage in 2016 rising to 1.077 euros, from 1,451 in 2008 (374 less). As for wages in DEKO, the average salary in 2016 was in the range of 1,270 from 1,549 euros in 2008 (-18,1%), in private and public sector legal entities to 1,047 from 1,378 euros, while in local government organizations at 925 from 1,192 euro.

The most pessimistic in Europe are Greek consumers

This stalemate, in which Greeks are located, ranks them as the first on the European scale of pessimism, according to data presented last week by IOBE. Specifically, in the second quarter of this year, the percentage of Greeks who are pessimistic about their household’s financial situation in the next 12 months remains on average at 59%, although it is marginally reduced to 62% (from 63%). a percentage of Greeks expressing bleak forecasts about the country’s economic situation. As to the intention to save, the percentage of households that do not consider saving as a potential for the next 12 months remains at 89%. In forecasts of unemployment, one in two estimates that the situation will worsen, with only 16% opposed. The percentage of those who say that they “just make ends meet” is expanding to 67%. All of this creates a consumer climate at extremely low levels compared to the rest of Europe. This is the second most pessimistic consumer attitude for the economy after Romania. The expectations of Greek consumers for their income declined by 21.5 points in the first half of 2018 and the purchasing intention by -25.7 points, by far the lowest in Europe, where in the second quarter of 2018 the consumer climate improved by + 23.2 units.

The «Made in Greece» Taxation of natural persons and companies

20% of taxpayers in Greece are required to pay 80% of taxes. The three taxes of 15 billion euros are known as income tax, corporate tax, and ENFIA. Of these 8 billion euros, 1.7 million natural persons are paying, 11.500 enterprises are 4 billion, and the other 3 billion are the owners of real estate. More specifically, 19% of natural persons pay 90% of income tax, 4.5% of businesses 83% of the corporate tax and 33% of property owners 66% of ENFIA. Finally, 80% of Greek businesses have either losses or marginal profits. According to the AAD, zero is one in two clearing, with only one in eight taxpayers entitled to a tax refund. On the other hand, some 2 million taxpayers have already received paychecks and are required to pay a total of 2.05 billion euros or an average of 1,047.5 euros. In detail, 5,046,036 tax returns have been submitted based on the AAD and data show that 1,961,483 payables are debit, 2,428,360 zeros and 653,193 credit with a total tax refund of 254,8 million euro.

Vassilis Korkidis, is President of Hellenic Confederation of Trade (ESEE) and President of the Piraeus Chamber of Commerce and Industry (PCCI)

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