The poorest but also the richest Greeks were those hardest hit by austerity measures taken in the country, losing the largest chunk of their available income, according to an International Monetary Fund (IMF) report on fiscal policy and income inequality.
In the report presented by IMF First Deputy Managing Director David Lipton on Thursday at the Peterson Institute for International Economics in Washington, the poorest 10 per cent of Greece’s population lost 15 per cent of their available income from 2008-2012. This percentage was higher than in other European countries that have implemented austerity policies, such as Portugal, Spain and Italy, where the available income lost by the poorest 10 per cent was around 5 per cent.
However, the austerity measures also had a large impact on the income of the richest Greeks, with those in the top 30 per cent income bracket also losing more than 15 per cent of their available income in the 2008-2012 period.
A key factor, according to the report, was a sharp rise in income tax and the lowering of the tax-free allowance to 5,000 euros from 12,000 euros, which had the greatest impact on the poor. Cuts in salaries for public-sector workers also greatly lowered incomes.
According to the report, horizontal cuts to pensions increased economic inequality, affecting those on lower incomes the most, whereas the repercussions would have been fairer if the cuts had been restricted to those receiving higher pensions. Public-sector wage cuts and higher income tax helped to reduce inequality, but this effect was offset by the lowering of the tax-free allowance and higher VAT, which increased inequality.
The report also referred to the impact of access to health and education on reducing income inequality in five European countries, including Greece.