Greeks still eating into savings

Greeks still eating into savings

The prospects of social prosperity remain limited as the country is on a low growth course due to insufficient investments, the Hellenic Federation of Enterprises (SEV) warns in its weekly bulletin. It also says the government should not go back on its austerity pledges, although households had to dig deep into their savings again last year.

SEV wonders to what extent Greece will be able to accelerate its growth rate after emerging from the bailout program so as to recover the ground lost in the crisis years. Recently, it notes, fear this will not be possible has increased, as in 2017 the growth rate was far below expectations, while for 2018 the estimates have again been revised lower.

“Greece is in a macroeconomic balance,” the bulletin notes, adding that “we do not save much and we invest even less.” Households, in particular, which also include freelance professionals, had a negative savings rate of 8.3 billion euros in 2017 alone, according to data highlighted by SEV.

Not only have Greek households been unable to make any new savings, but they drew 13.7 billion euros from their previous savings or from borrowing to invest 5.4 billion in investments (in properties etc) and pour the other 8.3 billion into consumption, thereby spending far more than what their disposable income allowed for.

Furthermore, the few investments made, adding up to 20.6 billion euros last year, were entirely funded by domestic resources, and revert to a negative figure when amortization is taken into account. “This means that the level of gross domestic savings and investments is insufficient,” the industrialists’ group argue.

For investments to grow, SEV says overtaxation must be contained to enhance households’ and enterprises’ disposable income, while an investment-friendly environment must be created. In this context SEV indirectly warns the government against undoing the agreed reforms, as that would render the economic recovery even more difficult. It stresses that canceling the pension cuts of 2019 and the tax discount reduction of 2020 would send the wrong message to markets and banish any talk of diminishing overtaxation.

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