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CRISIS MANAGEMENT in GREECE the Shaping of New Economic and Social Balances

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CRISIS MANAGEMENT in GREECE the Shaping of New Economic and Social Balances STUDY Nr. 58 • January 2018 • Hans-Böckler-Stiftung CRISIS MANAGEMENT IN GREECE The shaping of new economic and social balances Tassos Giannitsis1, Stavros Zografakis2 Abstract The aim of this study is to explore the impact of the crisis and crisis-induced policies on incomes, inequality and poverty in Greece, to detect the types of adjustment and to show why prevailing perceptions and attitudes caused a heavy economic, social and political cost. Based on extensive income and tax data it investigates the changing relationship between labour, capital and pension income, changes in direct, indirect and property taxation, and their incidence on pre- and post-tax inequality and competitiveness between 2008 and 2012-13. It examines also the losers and the winners and the resulting social reclassifications within the Greek society, the multifaceted types of poverty and inequality and the changing relations between the haves and the haves-not. The analy- sis distinguishes property and income by main sources at the deciles level, and for the top 1% and 0.1% of the income distribution, at the household and individual level. It covers the period 2008- 2015, depending on the available data. It is shown that many economic and social outcomes were the result of deficient approaches and ideological inflexibilities coupled to established political inter- ests, making the exit from the crisis more complicated and painful. A first version of this study was published in March 2015 (Giannitsis and Zografakis 2015). The present edition comprises a deeper and more synthetic analysis and some completely new topics: privileged tax exemptions, structure and taxing of realestate, contribution of female employment on household’s income, changes in employment patterns, evolution of the top incomes, effects of low- cost loans before the crisis and their impact on incomes and the banking sector after 2010. ————————— 1 Kapodistrian University of Athens, email: [email protected] 2 Agriculture University of Athens, email: [email protected] Tassos Giannitsis, Stavros Zografakis Crisis management in Greece The shaping of new economic and social balances October 2017 CONTENTS INTRODUCTION ....................................................................................................................................... 5 CHAPTER 1 OBJECTIVES OF THE STUDY .................................................................................................................... 21 CHAPTER 2 DEFINITIONS AND METHODOLOGICAL ISSUES ....................................................................................... 24 2.1 CONCEPTUAL CLARIFICATIONS .................................................................................................................... 24 2.2 METHODOLOGY ...................................................................................................................................... 28 2.3 THE DATA .............................................................................................................................................. 32 2.4 TAX EVASION: THE CENTRAL PROBLEM OF THE COUNTRY AND ITS RELEVANCE FOR OUR FINDINGS ............................. 36 CHAPTER 3 ADJUSTMENT POLICIES TO TACKLE THE FISCAL AND COMPETITIVENESS CRISIS ..................................... 41 3.1 DILEMMAS AND CHOICES OF FISCAL CONSOLIDATION ...................................................................................... 41 3.1.1 The intensity of adjustment ........................................................................................................ 43 3.1.2 The contrasting impact of revenue- and expenditure-led fiscal policy and the management of the fiscal crisis ...................................................................................................................................... 46 3.1.3 Salaries and pensions in the fiscal consolidation process ........................................................... 50 3.2 THE FISCAL CONSOLIDATION STRATEGY AS A FACTOR OF INEQUALITY .................................................................. 52 3.3 THE QUESTION OF FISCAL MULTIPLIERS ......................................................................................................... 54 3.4 THE POLICY MANAGEMENT OF THE COMPETITIVENESS CRISIS ............................................................................ 56 CHAPTER 4 THE IMPACT OF THE CRISIS ON INCOMES .............................................................................................. 61 4.1 THE GREAT UPHEAVAL OF INCOME HIERARCHY ............................................................................................... 67 4.1.1 Income from labour .................................................................................................................... 69 4.1.2 Income from capital .................................................................................................................... 73 4.1.3 Pension income ........................................................................................................................... 78 4.2 MAIN FINDINGS ...................................................................................................................................... 81 CHAPTER 5 DEPENDENT LABOUR INCOME DURING THE CRISIS ................................................................................ 87 5.1 HOUSEHOLDS WITH EMPLOYEES AND THEIR INCOME CHANGES ......................................................................... 87 5.2 THE UNEVEN EVOLUTION OF EMPLOYEE INCOMES .......................................................................................... 89 5.3 THE DIVERGING PATTERNS OF LABOUR AND PENSION INCOME .......................................................................... 96 CHAPTER 6 THE SIGNIFICANT CONTRIBUTION OF WOMEN TO HOUSEHOLD INCOME ............................................ 100 6.1 THE DATA ............................................................................................................................................ 100 6.2 INCOME LOSSES AT AN AGGREGATE LEVEL ................................................................................................... 101 Page | 2 6.3 WAGE AND SALARY INCOME LOSSES .......................................................................................................... 104 6.4 CONVERGENCE OR DIVERGENCE IN GENDER REMUNERATION .......................................................................... 107 6.5 FINDINGS AND CONCLUSION .................................................................................................................... 109 CHAPTER 7 THE REDISTRIBUTIVE IMPACT OF DIRECT AND INDIRECT TAXATION .................................................... 111 7.1 STATE INTERVENTION: DIRECT TAXES AND TAX INCIDENCE .............................................................................. 111 7.2 THE REDISTRIBUTIVE IMPACT OF THE INCREASES IN VAT AND EXCISE TAXES ....................................................... 116 7.2.1 The changes in indirect taxes .................................................................................................... 118 7.2.2 The impact of higher VAT and excise taxes on tax receipts ...................................................... 119 7.2.3 Changes in income inequality following the increases in VAT and excise tax rates .................. 121 CHAPTER 8 REAL ESTATE PROPERTY, ITS DISTRIBUTION AND TAXATION ............................................................... 127 8.1 REAL PROPERTY IN GREECE: A COMPARISON WITH OTHER COUNTRIES .............................................................. 128 8.2 BASIC DATA ON REAL ESTATE PROPERTY IN GREECE ....................................................................................... 129 8.2.1 Methodological remarks ........................................................................................................... 131 8.2.2 The distribution of real estate property .................................................................................... 131 8.2.3 A comparison between the distribution of real estate property and incomes .......................... 134 8.3 BANK CREDIT, REAL ESTATE MARKET AND NON-PERFORMING HOUSING LOANS ................................................... 137 8.4 REAL ESTATE, HOUSEHOLD DEBTS AND PROPERTY TAXATION ........................................................................... 145 8.5 CONCLUDING REMARKS .......................................................................................................................... 146 CHAPTER 9 AGRICULTURAL INCOME TAXATION AND INEQUALITY......................................................................... 149 9.1 PROBLEMS IN ESTIMATING AGRICULTURAL INCOME AND THE DEFINITION OF FARMER .......................................... 150 9.2 THE DISTRIBUTION OF AGRICULTURAL HOLDINGS .......................................................................................... 151 9.3 THE DISTRIBUTION OF HOUSEHOLD INCOME BY SIZE OF AGRICULTURAL HOLDING ................................................ 153 9.4 DISTRIBUTION OF AGRICULTURE INCOME DURING THE CRISIS YEARS ................................................................. 157 9.5 AGRICULTURAL ACCOUNTS AND BROADER MACROECONOMIC AGGREGATES ....................................................... 158 9.6 THE DISTRIBUTION OF SUBSIDIES ACROSS RECIPIENTS: A STORY WITH MANY INTERPRETATIONS .............................. 161 9.7 AGRICULTURE INCOME VS. OTHER INCOMES ...............................................................................................
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