ECONOMY

Salaries in Greece suffer double blow, but productivity rebounds

Greeks were hit with the biggest increase in taxation and social security contribution deductions from salaries and pensions among European Union member states in the 2001-12 period, according to a European Commission report on the European labor market.

This country is also the only one in the bloc that has seen a reduction in nominal salaries in all of the last three years, with civil servants taking a bigger reduction than their private sector counterparts in the period from 2010 to 2012. Greece further posted the biggest annual reduction last year, amounting to 8.3 percent, while the average eurozone salary climbed 1.3 percent compared with the year before. This means that Greeks have suffered a double blow, both on the salaries front and in terms of taxation.

Commission data showed that the total tax on salaries grew by 7.2 percent in 2012 compared with 2001, most of which came from the 6.4 percent increase in income tax. Both increases were by far the highest in the eurozone. Social security contributions from both employers and employees rose by 0.4 percent in the 2001-12 period.

All of the tax reductions of the previous decade have evaporated in the last couple of years, with citizens being burdened with even more tax obligations. Data from the Organization for Economic Cooperation and Development (OECD) showed that total deductions from salaries for taxes and contributions grew from 39.1 percent in 2000 to 41.9 percent last year.

Labor productivity posted a steady reduction from 2008, when the Greek recession started, to 2011, but last year it showed a 2.1 percent rebound from the year before, according to the European Commission report.