Monday, March 5, 2012

GREECE IS CHANGING - The reality to date

Greece has come a very long way in less than two years and even recently committed to the toughest austerity program in modern history, while entering the fifth year of recession. Yet some are continuously setting their sights on the targets Greece has missed, while ignoring the many that have been met.

  • Greece implemented a fiscal consolidation of about 6.5 percentage points of GDP since the beginning of the Program (2009-2011).
  • Primary deficit reduced from €24.7 billion in 2009 to €11.3 billion in 2010 and shrunk further in 2011 to €5.2 billion.
  • Greece achieved an annual rate of fiscal consolidation of 4.2% GDP on average, the highest in the developed world over the last few decades.
  • Greece ranks number two in terms of the degree of adjustment happening in its economy during 2009-2011, according to the Euro Plus Monitor.
  • Positive trade balance of goods and services (excluding oil and ships) for the first time since Greece’s Eurozone entry.

Impact on Greece
  • Greece is going now through the fifth year of recession
  • Since 2008 the Greek economy has lost around 13% of GDP
  • The primary deficit from 2009 to 2011 has fallen by 8.2% of GDP, with almost two thirds of the adjustment coming from cuts in primary expenditure (5.3% of GDP)
  • Primary expenditure has fallen by 16.4% since 2009
  • Unemployment now exceeds 20%

Supporting Facts
  • Cumulative Cuts in Nominal Public Sector wages over 30% in 2009-11.
  • Cut in salaries of State-owned Enterprise (SoE) employees by 30% in 2010, with an additional average cut of 20% and ceiling on average monthly salaries of €1,900 imposed in 2011-12. As of November 2011, there has also been an 18% year-on-year reduction in SoE employees and 29% decrease in total SoE personnel expenditures.
  • Cuts in nominal pensions in the public and the private sector by 10% in 2010, with further 4% average cut introduced in 2011-12.
  • Employees in the public sector reduced by 10% = 85,000 employees since 2009
  • Unemployment has already risen from 8% in 2010 to more than 21% in the first few months of 2012.
  • VAT rates increased from 19% rate to 23%, from 11% rate to 13% and from the 5.5% rate raised to 6.5%. A number of goods and services were also transferred from the 13% rate to the 23% rate.
  • Excise taxes raised by 33% on fuel, cigarettes and alcohol.
  • Special levies on profitable firms, high income individuals, high-value real estate.
  • Solidarity tax on total declared incomes higher than €12,000 Tax rate from 1% to 5%.
  • Additional property tax to be collected via electricity bills from 2011 with expected revenues close to 1% GDP.
  • Effective retirement age set to 65 years, increasing in line with life expectancy. Minimum contributory period for retirement on a full benefit gradually rose to 40 years.
  • 22% reduction in the minimum wage and 32% reduction in the minimum wage for employees under the age of 25

Greece is determined and committed to reform, recovery and future growth, despite the high price the country is asked to pay. 

Supporting Facts
  • According to “Doing Business-World Bank 2012”, the “Starting a Business” time was reduced from 19 to 10 days and Greece’s respective ranking was improved by 14 positions
  • EU Taskforce established to support implementation of structural reforms.
  • 108 professions were liberated by a single law.


*We thank our reader Kathy K. for the information!

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