Economy loses 122 bln over four years

Over the last four years Greek businesses and households have sustained losses of about 122 billion euros in the form of cuts to pay and social benefits, increases in taxes, and the big liquidity drop and deposit outflows suffered by banks, according to Finance Ministry data regarding the development of public spending, direct and indirect taxes and loans and deposits in the banking system.

The losses represent just over half of the country’s gross national product and provide a telling indicator of the size of the recession which the economy has been mired over the four years of fiscal adjustment.

Budget data for the period between 2009 and 2013 put the total amount of salary cuts in the public sector at 9.3 billion euros – as spending on public sector salaries fell from 31 billion to 22.1 billion euros, and is projected to fall further to 21.7 billion in 2014. Social transfers, that is spending on pensions, health and benefits, shrank from 49 billion in 2009 to 39.1 billion euros in 2013 and are projected at 38.5 billion next year. Public consumption and operating expenses have fallen by 11.2 billion euros, from 20.8 billion to 9.6 billion at the end of 2014.

Besides the cuts to public sector salaries and pensions, also significant are the losses for businesses and households in the form of increased taxes. While public and private sector salaries have sustained average losses of around 30 percent, direct taxation revenues have shown a marginal decline of just 5 percent over the last four years. Indirect taxes present a similar picture, as revenues from VAT and special consumption taxes fell only 8 percent while total private consumption shrank by 53 percent.

Businesses and households have also been hit hard by the lack of liquidity in the market, as banks are unable to issue new loans. Since 2009, lending to the economy as a whole fell by 34 billion euros, while deposits declined by 75 billion – partly being channeled abroad. About one-third of this sum is estimated to have been spent on current consumption requirements and the payment of taxes.

Finally, the government still owes 6.8 billion euros in rebates to businesses.