While Greece’s economy is coming back by leaps and bounds, now rated investment grade status which entices foreign businesses, it hasn’t trickled down to Greeks who have a minus savings rate, the lowest in the European Union.
That was shown in an analysis by Steve Bakalis, an expert on international business economics and management and former adjunct professor for Australian universities, who wrote in Kathimerini about a dilemma violating key economic principles.
Many Greek households are already trying to scrape by to afford supermarket prices even with the cooling of inflation and the financial picture is so dire for many they can’t save a euro.
Bakalis’ analysis found that EU residents save on average 12.7 percent of their disposable income, led by Germans who put aside 19.9 percent but that Greeks’ eat away at 4 percent of what they had saved before 2022.
“This indicates that households spent more than their gross household disposable income and were therefore either using accumulated savings from previous periods, or were borrowing to finance their expenditure, especially Greece,” he said.
Without deposits, banks don’t have enough money to lend out at high interest rates while paying next to nothing on what people put in, limiting the ability to fuel businesses that produce taxes and hire workers.
“To a large extent, private investment is supported by private savings and taxation finances public expenditure, so the private sector operates in a collaborative environment with the public sector. You cannot pursue prudent fiscal policy without following these elementary economic rules and principles,” he said.
Other data said Greece’s underground economy is some 20.3 percent, higher than the EU’s average of 17.3 percent, worsened by confiscatory tax rates among the world’s highest that drive many to hide their income.
He noted that Bank of Greece Governor Yannis Stournaras recently report that Greeks consume 40 billion euros ($43.48 billion) more than they declare to the tax office to maintain some quality of life for them.
He said Greece is controlled by its bureaucracy “which is unable to modernize because the state has become autonomous and is controlled not by citizens and politicians, as it should be, but by civil servants and executives of the administration which possess the information, know the procedures, and process the laws in such a complicated way that the ordinary, everyday Greeks have been alienated and the great majority of them feel and behave as individuals and not as citizens.”
On top of that, salaries in the public sector in key positions in Greece are far higher in many cases than in the private sector, unlike the United States and other countries where government positions don’t bring wealth.