POVERTY WATCH 2019
Greek Antipoverty Network
Contents
1. Greece in a perpetual poverty spiral? Almost two hundred years as an independent state page 3
2. What is poverty? How do we measure it? page 4
3. Poverty in Greece in 2019 page 6
4. What does Greece do to reduce poverty? page 8
5. Conclusions page 10
6. Recommendations page 13
7. Sources (the sources are available upon request)
1. Greece in a perpetual poverty spiral? Almost two hundred years as an independent state
The Greek Anti-Poverty Network (EAPN-Greece) is part of the European Anti-Poverty Network (EAPN). EAPN aims to reduce poverty and inequality, as well as increase the participation of people experiencing poverty.
In the present report on poverty, we look at the latest statistical and developmental trends related to poverty, contributing with our views on the measures required to reduce poverty.
In 2021, Greece plans to celebrate its two hundred years of independence. The special committee set up to organize the celebration is already in the process of accepting proposals for the implementation of relevant actions or events. However, its independence in economic terms does not appear to have been achieved and, therefore, phenomena such as poverty continue to describe the Greek society.
Greece has never stood as an economically independent country. Its history is but a story of debt, bankruptcy and dependence on external factors. The size of the country more than doubled between 1880 and 1947. However, two world wars, two Balkan wars, and catalytic political events such as the civil war (1944-1949) and two military dictatorships (1936-1940 & 1967-1974) did not allow political or economic stability. The huge wave of immigration to the USA and Central Europe in the 1950s and 1960s only served as a temporary solution.
The question of the pros and cons of Greece's membership in the European Union and its participation in the Euro are still under discussion. Between 1974 and 1990, the country received new loans, approaching a debt rate well above the EU average. Privatization of public property and public infrastructure led to a slight reduction in debt, but at the end of the 1990s recession found Greece with a public debt above 100% of its GDP (along with Italy the only two EU member states with this rate).
In 2009, the country appeared to be losing control of its public debt, which had already reached 127% of its GDP. In May 2010, a 'Loan Facility Agreement' with EU countries was adopted, as well as a ‘Stand-By Agreement' with the International Monetary Fund. The two agreements are called "Memorandum” in one word. Since then, and according to the latest figures for 2018, the Greek debt rose to 335 billion euros or 181.2% of GDP and Greece became the country with the second largest debt in the world.
Much of what is today called "public debt" was actually private. In 2009, Greece's main creditors were European banks, mainly German and French ones, largely exposed to lending to Greek banks and Greek bonds . Through the three "Memoranda", more than 250 billion euros were given in the form of loans to the Greek state, however, almost all of them were used to repay EU creditors. In this way, the Greek private debt was transformed into public debt.
One of the main requirements for the conclusion of this loaning is the reduction of pensions and salaries. Minimum earnings (gross and net) have fallen sharply , and today they are still below the 2006 level . Currently, according to the “Ageing Europe 2019” report, the retirement age in Greece is 67 years of age, the longest one in the EU-28 countries.
Under these circumstances, the target set in 2010 by the Strategy “Europe 2020” to reduce the number of people living in poverty or face the risk of social exclusion in Greece by 450,000 by 2020 compared to 2008 does not only seem non feasible, but more like a joke. A new objective of reducing poverty by 50% by 2030 in the context of the national implementation of the United Nations Sustainable Development Goals and the Agenda 2030 Action Plan has also recently been set.
2. What is poverty? How do we measure it?
In Greece, poverty is predominantly relative, that is it refers to people that are disadvantaged when compared to the standard of living of the rest of the population. Relative poverty is generally defined by reference to "Poverty Risk". Poverty risk is defined as the proportion of people living in households whose total equivalent disposable income is less than 60% of the national median equivalent disposable income (average living standard).
Eurostat and the Hellenic Statistical Service use the AROPE index to measure relative poverty (persons living at risk of poverty or social exclusion). In addition to people’s income, the index measures their financial inability to 1) pay rents, mortgages, bills, consumer or mortgage loans 2) go on holiday for at least one week per year 3) eat meat, chicken or fish every other day 4) manage unexpected needs of 375 EUR 5-8) have a landline or mobile phone, color TV, washing machine, car 9) have access to heating in the winter or cooling in the summer.
Lack of four out of the nine parameters mentioned means that one person lives below the poverty limit. Underemployment (living in low-income households) is also a factor that co-shapes the AROPE indicator. The indicator is the basis on which the European target of reducing the number of people living in poverty or the risk of social exclusion by 20 million in 2020 will be measured.
From 2005 to 2010, relative poverty in Greece experienced decreasing trends, with people living at risk of poverty or social exclusion accounting for 27.7% of the total population in 2010. That number started to increase dramatically after 2011, reaching 36% in 2014. Slowing slightly, reaching 34.8% in 2017 and 31.8% in 2018 according to the latest available data.
The household income of a person at risk of poverty in 2018 was EUR 4,718 per year. For a family (two persons plus two children under 14 years of age), it is EUR 9,908. Compared to 2012, the amounts are EUR 5,708 and EUR 11,986 respectively.
Additional poverty determinants were created based on the need, reference or minimum family budgets, trying to determine the absolute dimension of poverty (also called "extreme poverty"). The "extreme poverty line" can be defined as the monthly cost of a "basket" of products and services, without which a Greek household cannot survive. This 'basket' corresponds to the minimum living requirements, while its value varies depending on the position of the household, its size and composition, as well as whether members live in privately owned homes or pay rents or mortgages.
According to the latest relevant survey, the rate of extreme poverty in Greece in 2015 was around 15%. In 2011 the index stood at 8.9% while in 2009 it did not exceed 2.2%.
But poverty can also be measured through the experience of those who live in it:
“I worked in construction; that way I lived my whole life. With the crisis everything collapsed, jobs stopped and suddenly I had no way to live. At first, I couldn't pay my bills. I thought I could save money by cutting costs like a cup of coffee or a beer with friends. I stopped going to weddings or celebrations, I had no money to buy a gift. I was isolated when the unemployment benefit ended, I couldn't even pay for the house. I sold what I could, and I asked an old friend to keep the rest. I came to you to find me somewhere to live for the next two years, until I get my pension. I missed everything, but mostly what I lost is my dignity. My pocket was full, I was paying for a round with my friends. Now I have to go… to have a cup of coffee for free. My dignity, this is something I will never find again. I grew up in a poor family, but we never felt that way, we had dreams and plans for the future. Now, no prospect, nothing”.
3. Poverty in Greece in 2019
It was reported that the income of a household considered at risk of poverty decreased between 2012 and 2018 by 17.5% (for both individuals and families). At the beginning of the crisis, in 2008, real GDP per capita in Greece stood at EUR 22,560. It declined to 17,240 in 2012 and 16,690 in 2013 and raised to 17,790 in 2018. Greece lost almost 25% of its GDP during the crisis, far more than any other EU country.
With the relative poverty rate at 31.8% for 2018, indicatively, the most affected social groups are:
Unemployed and long-term unemployed: The gap between the statistics of the Hellenic Statistical Service and the Greek Manpower Employment Organization (OAED) does not allow for safe conclusions about the number of unemployed individuals in Greece. More specifically, for October 2019 the Hellenic Statistical Service records 780,913 unemployed persons , while 915,516 persons are registered in the OAED registers, 484,664 of whom are registered as long-term unemployed, for a period of more than 12 months.
According to the General Confederation of Greek Workers (GSEE) Interim Report for 2019 (p.54), the most severe problem of poverty (43.3% of the total) is faced by the unemployed population. Long-term unemployed based on OAED data for December 2019 total 500,049 people of a total 1,064,526. This group is also the one that according to the data has the highest chance (70%) of not returning to the labor market.
Youth: The proportion of the inactive population in poverty is high (24.7%), with an emphasis on young people. The population of the young unemployed aged 15-34 who have completed their degree is 50.5% of the total, a significant increase compared to 36.3% in 2013, which places Greece at the last place among the countries of the EU regarding the professional utilization of its young people (and without taking into account the Greek youth who have migrated). For higher education graduates the related ratio was 48%.
Foreigners: Those who do not have Greek citizenship are far more likely to become affected by poverty or the risk of social exclusion (56.5%). Those who are not citizens of the EU-28 countries (58.4% vs. 45%) are mainly affected, in addition those born in another country and living in Greece today (55.1% compared to 32.1% that concerns foreigners who were born in Greece).
Child poverty: The latest Eurostat data shows us that the proportion of people aged 0-16 at risk of poverty or social exclusion is 32.2% or 517,000 persons. Child poverty is galloping in Greece, albeit with declining trends, placing it at 3rd place among the EU-28 countries, after Romania and Bulgaria. With a different methodology and approach, OECD’s and UNICEF’s reports highlight the phenomenon, placing child poverty growth in Greece at 300% over 2005. Child poverty is higher in single-parent families (from the smallest percentage increase compared to the previous year, while the proportion of single-parent families who are unable to pay their bills is 48%), to those who do not have Greek citizenship, in households with part-time jobs and low-educated households.
Working poor: A recent (October 2019) consumer survey by the Hellenic Business and Retail Association found that 44% of their income is spent on utility bills and taxes. An additional 14% is spent on rentals, while 10% of the reference population spends more than 100% of their income, so it is, in fact, borrowing. Households reporting failure to manage their bills on time account for 35.6% of all households, the highest percentage in the EU-28 countries and 5.5 times higher than the EU average (6.6%).
Poverty or its risk has not only affected the out-of-work population. The phenomenon of 'working poor', people who, despite working, their incomes are not sufficient to meet their needs, has intensified. Although the indicators show a decrease of the phenomenon (from 15.1% in 2012 to 12.8% in 2017 and 10.9% in 2018 ), this decrease is rather artificial, given that what has actually reduced is the poverty threshold. This gives the impression that the number of working poor is falling, while in fact their income has not improved. Even under these circumstances, however, there is an increase in the age group of young people (18-24) and those who work part-time. At the age of 55 and over, the proportion of working poor ranges from 15-17%, placing Greece fifth in the EU-28. This risk is also high (21.8%) in the case of self-employed workers.
People 18-64 years of age: The risk of poverty and social exclusion is higher in this age group (35%) compared to the percentage of 21.3% in the 65+ age group. It is equal between men and women (34% and 36% respectively), but at older ages poverty affects women more (23.4% vs. 18.7% of men). Even in the case of people who are already receiving a pension (referring to the age group 50-69), however, this is often not sufficient to meet basic needs. Almost 88% of this group, based on a 2012 survey, need to continue working in order to have an adequate income (Ageing Europe, p. 94, p. 105)
Homeless people: In the aforementioned report entitled "Ageing Europe 2019" Eurostat highlights (p. 38) one of the major issues that contribute to the phenomenon of poverty in Greece. 39.6% of Greek households cannot afford the cost of maintaining their home (rented or privately owned), a percentage which is double of that of Bulgaria that follows with 19%. The phenomenon is less evident with older people (27.2%), but it affects young people dramatically, as, for example, in the age group 20-29, it is 42.7% and in the age group 16-19 it is 46.3%, with a rising tendency. Housing price rises of 7.4% in the first nine months of 2019 (Athens 10.3%) , followed by higher increases in rents , is expected to contribute to the increase in poverty phenomena.
People eating at soup kitchens: Since the crisis, the number of soup kitchens in Greece has multiplied. The main food distributor is the Church, but the most recent figures are from 2015, reporting 1.5 million daily portions to 500,000 people. Smaller distributions are made by Municipalities and NGOs. There is no indication that this figure has declined, as the state of the poorest has not improved.
At county level, the poorest areas based on the Independent Authority for Public Revenue (AADE) data for the median income declared is Ilia with € 8,124, Etoloakarnania, Kastoria, Evritania and Pella. The phenomenon of poverty, however, or the risk of poverty and exclusion, ultimately seems to concern broad sections of the Greek society. Contrary to the dominant narrative of the "Greek come-back", what we as a Network perceive as a "non-poverty" situation is far from becoming a reality.
4. What does Greece do to reduce poverty?
As stated, the objective of the Strategy “Europe 2020” of reducing the number of people living in poverty or the risk of social exclusion in Greece by 450,000 by 2020 does not appear to have been achieved. In fact, 2017 figures show an increase of 655,000. In a recent report , the European Parliament "express its regrets that the objective of the Europe 2020 strategy to reduce poverty will most likely not be achieved" (p. 21).
The way in which governments have tried to manage the tectonic changes that have taken place in the Greek society during the crisis has been to formulate a subsidy policy, which, as a means of reallocating resources, is always a necessary first step.
In 2012, the Hellenic Parliament, at a special meeting of the Committee on Social Affairs , investigated the situation of poverty in Greece in view of the prospect of establishing a minimum guaranteed income. In 2014 the “Minimum Guaranteed Income” was introduced, which was piloted in 30 municipalities and later throughout the country. In 2016 the benefit was renamed "Social Solidarity Income" (KEA) . The KEA has become a key tool in the fight against poverty, by empowering low-income people.
KEA support is up to € 200 per month for a single person household and is increased by € 100 for each additional adult and € 50 for each minor member. To register in this support, it is taken into account the period of the last six months before applying. An income of less than € 1,200 is required for single-member households, up to € 3,000 for six-member households. There are also restrictions on the value of movable and immovable property.
Approved household applications in September 2019 amounted to 268,262 and represented a population of 507,391 persons (approximately 4.69% of the Greek population). The overwhelming majority (54.26%) are single-parent households, 56% women, with only source of income social benefits or other benefits at 28.1% and 25.8%, respectively, while 53% declare zero income. 50% declare they are unemployed, but there is 20% of working persons and 21.1% of children. Lastly, 49.7% of beneficiaries have completed their compulsory education.
At the end of December, the renaming of the ΚΕΑ to Minimum Guaranteed Income was announced.
Funded by the EU Fund for the Most Deprived of Food Aid (TEVA) , the “Food and Basic Material Assistance Operational Program” has been implemented since 2014. The Program is primarily targeted at people living with physical deprivation, i.e. 16.7% of the population for 2017. This percentage shows decreasing trends (given the country's general poverty), but still remains increased by 47% compared to the 2009 counterpart .
Since 2017, the beneficiaries of TEVA have been the beneficiaries of the KEA. The number of people receiving TEVA support rose to 452,840 in 2018 , while Eurostat recently announced a slightly increased number (469,000 ) of people living in deprivation and at risk of poverty. Food distribution through TEVA comes to complement similar processes through Social Grocery Structures, which also operated under the responsibility of Municipalities and the Church (150 grocery stores for 80,000 people).
The Child Allowance is granted to families, depending on their marital status and income. The requirement is the legal and permanent stay in Greece for the last five years and the filing of a tax declaration . As of March 2019, the applications approved were 104,597 .
Recently the government's intention to extend stay in the country to 12 years, has been announced, which, if implemented, is likely to affect the immigrant population in particular. This amendment also applies to the Housing Allowance.
The Housing Allowance is based on income and family criteria and corresponds to a € 70 subsidy for a one-person household, increased by € 35 per member. The ceiling is 210 euro.
According to available data , by the end of September 2019, 232,686 applications had been approved, corresponding to 602,141 persons, one third of whom are children. More than one-third relates to single-family households, and one-fourth to four member households. 53.5% of approved applications are for households that have at least one member of foreign nationality. Finally, 46,436 households combine receiving housing allowance with KEA.
Other benefits are: a) social solidarity for uninsured elderly people and similar housing allowance, b) welfare cash benefits for people with disabilities, c) the new 2,000 euro allowance for each newly born from 1/1/2020 with a budget of 123 million and (d) other programs and actions relating to the Ministry of Labor and Social Affairs welfare policies.
5. Conclusions
As mentioned above, it is almost impossible for Greece to meet the 2020 targets. The phenomenon of poverty is crossing the Greek society horizontally, which is far from reaching the level it was a decade ago.
This situation does not appear to be reversible in the foreseeable future. The burden of the Greek public debt (€ 317.5 billion in 2017, € 334.7 billion in 2018 and € 334.2 billion in 09/2019 ) renders any such discussion pointless. Over the last decade or so, much of the government's spending has gone to social benefits, but the sheer amount of debt is unmanageable.
These social benefits are largely attributable, further to pensions, to a range of benefits in support of the most vulnerable. The danger in this is the creation of a ‘culture of benefits', or the old-time question as to whether and how social policy ultimately helps in avoiding the phenomenon or supports its reproduction .
The impoverishment of the society was mainly caused due to high taxation and reduced wages. But a research by the Hans Bockler Institute in 2015 showed that the Greek society did not all contribute proportionally. The figures showed the poorest Greeks to have been taxed in times of crisis by 337% while the wealthiest strata by 9%.
So, it seems that there is a process of "normalizing" poverty and familiarizing the Greek society with it. This process is further supported by a devastating ratio of indirect / direct taxes, which according to the draft budget for 2020 is 62-38 (direct taxes are income taxes). At the same time, these taxes are paid by 74% by natural persons and 26% by businesses.
The non-collection (or delayed collection) of direct taxes by legal entities in 2018 is generally outweighed by the increased return on indirect taxes. At the same time, and compared to the countries that went through adjustment programs and / or faced fiscal problems, the change in indirect tax revenues as a percentage of GDP in Greece in 2009-2017 was the highest (by 5.6% of GDP), while direct tax revenue rose just 1.6% of GDP.
The OECD’s imprint of Greece gives us a picture of a medium but wider, in relation to the OECD countries, of inequality (0.54-0.47) which through the transfers goes down to 0.33 - 0.32. Interestingly, the special report on the state of the country in the period 2007-2017 illustrates: (a) the annual reduction of government expenditure per capita by 2.6%; b) the reduction of capital expenditure from 12.1% to 7.4%, including 0.8% for health, the high percentage of 2.5% for defense spending and skyrocketing of expenditure for public order and security spending to 0.6% to 2.1%.
The GSEE examination of the Gini index and the Gini index without the transfer payments other than pensions for the case of Greece and the Eurozone shows that for 2017 (latest Eurozone data) in Greece the difference between the two indices is 2.6 percentage points, while for the Eurozone 4.9 percentage points. This shows that pensions constitute the most important transfer payments while maintaining inequality in both Greece and the Eurozone, and that other transfer payments, such as unemployment benefits, are more important in the Eurozone than in Greece (p.58).
We wrote at the outset that Greece has had debt and dependency problems over time. Assuming that this report discusses the poverty side and its management / response, the answers that need to be given are political in nature. It is also of a political nature to answer from where the resources needed are derived and how to use them most effectively - and for whom.
Summarizing:
• Greece has long-standing and structural weaknesses that it has never been able to manage.
• Management was made possible with the financial assistance of the EU countries - its peoples mainly, since decisions of their Parliaments were required.
• The loans given to Greece rescued mainly German and French banks. At the same time, a private interbank debt was converted into public debt. At the end of 2019, every resident of the country owes approximately 31,000 euros.
• This debt commits the country's productive effort for at least two generations, which will take less than 100% for it to achieve.
• The country's basic infrastructures (airports, ports, energy, communications) have lost their public character, often at prices far beyond these markets and often also through the use of Community subsidies from buyers. This trend continues and is largely pursued.
• Wage cuts to curb consumption and taxation focused on the middle and lower strata have rendered the country poorer and marginalized financially large sections of the population from all social groups
• This reality has been attempted to be addressed through various forms of subsidy policies that merely maintain it.
• There appears to be strata of the population with no prospect of escaping poverty. This starts now and is considered regular and normal. This regularity is supported by the dominant public discourse. Transient improvements in numbers are presented as achievements but incorporate the dimension of regularity.
• Young people born since the mid-1990s have shaped a culture dominated by poverty, crisis, deprivation, benefits, all phenomena in which they see themselves included. This reality does not produce positive prospects for the Greek society.
Poverty figures in Greece tell us:
• The Greek society is burdened with a huge debt of more than 330 billion euros, the second largest in the world in terms of its GDP.
• Managing this debt falls on the shoulders of citizens rather than on high incomes, through a rate of indirect taxes of 62-38 for 2020. Citizens are over-taxed, often burdened by taxes not paid by businesses.
• By the end of 2019, the unemployed people exceeded 1 million, half of whom are out of the labor market for more than 12 months, with little prospect of return.
• 507,000 people survive thanks to the KEA, which is received by people with an annual income of 2,400 euros. 602,000 people can't pay their home rent without support, almost 47% of young people up to the age of 19.
• Greece is in the last position of the EU countries in the employment of its young people. • Greeks need to work until the age of 67 to retire, the highest threshold in EU countries.
• Wages and pensions are below 2006 levels. • 517,000 children are experiencing poverty, a threefold increase over 2005.
• Over 750,000 employees are paid below 500 euros.
• 4 million tax declarations correspond to an income of 20,000 declarations over 100,000 euros.
• Almost 37% of Greeks cannot meet the needs of their home. Owned homes cannot be maintained.
• More than 450,000 people received food from the TEVA program, more than 80,000 people were supported by social groceries. There is no reliable number of people feeding on soup kitchens.
• More than 800,000 people declare zero income.
• Citizens of third countries located in Greece are more likely to experience poverty and to a lesser extent supported by Greeks from subsidized policies. This trend will get worse.
• A population of 100-200 thousand of irregular migrants is invisible to all support systems .
6. Recommendations
Increase in Wages
Eurobank's weekly bulletin on 28/06/2019 reports that per capita consumer spending in Greece dropped from 100% of the EU-28 level in 2007 to 80% and 76% in 2013 and 2018 respectively. In terms of fixed investment per capita, the Greek economy from 108% of the EU-28 in 2007 moved down and down sharply to 49% in 2013 and to 38.1% in 2018, penultimate among the EU countries. At the same time, GSEE in its 2018 report states that in the private sector 571 thousand people were paid less than 500 euros, while 251 thousand people were paid less than 250 euros.
The annual report of the German Institute for Economic and Social Research WSI (which belongs to the Hans-Bockler Institute) records the increase in minimum wages in the EU countries together with all eastern countries except for Slovenia (Luxembourg 11.97 - Bulgaria 1.72). On 01/02 the hourly wage rose to 3.76 euros. It is this increase, which the EU's enhanced monitoring report on Greece in the 2nd month of 2019 considers not to be covered by the agreement, devoting pages 57-60 to wording reservations and possible scenarios of adverse impact on economic indicators.
Reforming the tax system
The data available for tax declarations (tax year 2017) show that 52% of tax declarations report up to € 8,000 per year (665 per month), giving us 12.3% of taxable income. On the other hand, 0.32% of tax returns over 100,000 euros give us 5.5% of income. It means that almost 4 million (3,654) declarations in the 0-5,000 euro scale give us as many as 19,869 statements in excess of 100 thousand €.
Based on the tax scale of the employees, income above 40,000 euros is taxed at 44%. However, the 9% is of 10,000, 44% of 40,000 and 44% of 100,000. With regard to legal entities, the tax rate reduction model to generate surplus profits and so contribute to the increase of employment has been re-tested and has not been effective. At the same time, the ratio of indirect taxes is considered unacceptable even by first-year students of fiscal policy.
Debt reduction
The country's debt is unmanageable, and reports of positive developments as it declined by 500 million in 2019 are beyond reasonable criticism, undermining any prospects for meaningful discussion on the issue. A concerted effort should be made to reach out to the country's creditors so that the Greek society can get rid of most of it.
At present, the only attempt that seems to be made consistently is to arrange the banks' balance sheets. But, in our opinion, this will not restart the economy. The only prospect for this is that both the public and private sectors can spend money creating demand.
Repurchase of houses from indebted households
Since the beginning of 2018, thousands of home and business loans, or real estate collateral packages, have been grouped and sold to private collection companies. Under no circumstances has the sale price exceeded 29.6% of the book value of the package . By the time the first-home protection scheme expires on 30.04.2020, the platform through which the state mortgage subsidy system is backed up has approved 88 applications by 10/01/2020, in nearly 40,000 cases where application procedures have been initiated . The system does not seem to be able to achieve its goals.
We believe that citizens should be given the opportunity to 'repurchase' their home, at a rate that will safeguard both themselves and the banks. Greece is a country with a high proportion of ownership, which is sometimes the feeling that public discourse is treated as an accusation. Dozens of scandalous arrangements of business loans have seen the light of publicity, which is likely to raise to thousands those already made.
Poverty reduction requires a decisive social policy: improving employment and reducing long-term unemployment, increasing affordable housing, functioning social and health services, providing equal opportunities in education and raising the basic social standard.
We know exactly the social and economic conditions of the country - we live in it. We are not convinced, however, that the methodologies adopted, and the priorities set have the result they sought to achieve. They also do not, in our view, make the most of the - limited - public resources we have available in an effective manner.
The Hellenic Anti-Poverty Network transfers the experience and knowledge of its members and the expertise of its fellow Networks from Europe. But it mainly carries the voice of the people who are experiencing or seeing poverty approaching them themselves. We are open to share this knowledge and this voice with all those who produce or evaluate politics in Greece.