ECONOMY

Nominal income up, but purchasing power stays flat

Brussels – The average Greek’s purchasing power has hardly budged since 1995, despite impressive nominal increases in income, data released yesterday by the European Commission show. The data concern the period from 1995 to 2001 and show how inflation, and the inability to make the best of the flood of EU aid, have kept Greeks’ purchasing power essentially at the same levels. Nominally, things are going well. The average gross income rose 37 percent between 1995 and 2001, a pace surpassed only by Great Britain and far ahead of the rest. The average annual increase over the period was 7.4 percent in constant prices (in euros). This led the average gross income of Greeks to rise from 11,291 euros in 1995 to 15,431 euros in 2001. It should be noted that this is still low and comparable to average incomes in Portugal, Spain and Italy. Average annual gross income growth was 10.1 percent in Great Britain, 4.1 percent in the Netherlands and less than 3 percent in seven other EU countries. France had the lowest annual gross income growth, just 2.2 percent. There are no data for Austria, Germany, Ireland, Portugal and Sweden. An analysis by sector shows that nominal incomes increased least in the construction sector. This was expected, as a steady influx of economic migrants since 1990 has undercut wages significantly. The biggest increase is in education. And what did this big leap in nominal income provide in terms of increased purchasing power? According to the Commission data, Greeks’ purchasing power increased by just 1 percent (total, not annual increase) between 1995 and 2001. It is not just taxation which accounts for this discrepancy, although Greece kept tax income brackets steady between 1990 and 2001, despite very high inflation. After all, other European countries tax their citizens more heavily. In Belgium, for example, a country of heavy taxes, much lower growth than Greece’s and a huge public debt, gross income rose 14 percent between 1995 and 2001, and purchasing power rose 6 percent. Notably, the data do not include farmers’ incomes. There, the situation is somewhat better, but one must take into account the huge inflows of aid through the EU’s Common Agricultural Policy. The main culprits, then, must be inflation, consistently higher than the EU average except for a very brief period in 1999, a lag in competitiveness and an inability to translate high economic growth into more jobs. For the record, a future EU member, Hungary, showed the greatest increase in both gross income (73 percent) and purchasing power (32 percent) between 1995 and 2001.