The Distributional Impact of the Greek Crisis in 2010*

Abstract

The severe economic crisis affecting Greece is widely thought to be having a significant social impact in terms of greater inequality and increased poverty. We provide an early assessment of whether (and to what extent) this was the case in 2010, the first year of the Greek crisis. We distinguish between two interrelated factors: on the one hand, the austerity policies taken to reduce fiscal deficits; on the other hand, the wider recession. Using a tax-benefit model, we attempt to quantify the distributional implications of both. With respect to the austerity policies, we focus on the changes affecting taxation, pension benefits and public sector pay. With respect to the wider recession, we model the effects of rising unemployment and inflation, as well as of lower earnings for self-employed workers and for employees of private firms. In simulating the impact of these changes on the distribution of incomes (and in estimating how the total burden of the crisis is shared across income groups), we take into account tax evasion and benefit non-take-up. We conclude by discussing the main findings, methodological pitfalls and policy implications of our research. Policy points• Fiscal consolidation through spending cuts and tax increases raises the risk of increased poverty and inequality.• To prevent this, austerity policy packages need to strengthen the social safety net (through both income support and access to essential services) and to compensate the weakest groups for their losses.• The Greek crisis combines drastic deficit reduction with a deep and protracted recession. This has raised the demand for social protection, but the response of the Greek welfare state has been inadequate.• We find that in 2010, the first year of the Greek crisis, keeping the poverty line fixed at 60 per cent of 2009 median real incomes, poverty has risen dramatically.• Changes in inequality were less severe: some austerity policies appear to have had a progressive effect. However, in relative terms, the poor seem to have contributed more to the government's fiscal consolidation effort than the rich.

Counterfeit purchase typologies during an economic crisis

“…The government has announced rounds of austerity measures, and under these, public sector pay and pension benefits were cut. In the context of tax reform, the government changed personal income tax, raised the top rate and announced a clampdown on tax evasion (Matsaganis and Leventi, 2011). Even today, the government keeps imposing austerity so that the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) will keep rescue loans coming.…”

The Short‐ and Medium‐Term Impacts of the Recession on the UK Income Distribution*

“…They suggest that these early elements of fiscal consolidation packages reduced incomes on average, but by widely varying amounts across countries; and they hit higher-income groups hardest for six out of the nine countries studied. Matsaganis and Leventi (2013) study the effects of the Greek recession and associated austerity package between 2009 and 2010. They find that these immediate effects, comprising a combination of falls in labour market incomes and austerity measures, were spread widely across income groups -overall income inequality was quite stable, and relative income © 2013 The Authors Fiscal Studies © 2013 Institute for Fiscal Studies poverty rose slightly but by far less than absolute income poverty.…”

Estimating the distributional impact of the Greek crisis (2009-2014)

“…For a separate analysis, confirming that the 2010 VAT hikes were highly regressive, see Matsaganis and Leventi (2013). Income deciles were equivalised according to the OECD equivalence scale (i.e.…”