Greece ranks last among OECD countries in terms of savings, according to a study conducted by the Athens University of Economics and Business (AUEB) funded and presented by Eurobank on Monday.
The study, which highlights the causes of low savings rates and the potential risks to economic growth, reveals that the average annual savings in Greece stands at €1,076. A couple with children experience negative savings, averaging -€2,159 annually. Pensioners save the most at €2,248 per year, while employees save €542 and the self-employed just €63.
Main Causes of Low Savings
The study identified several key areas contributing to low savings rates:
- High Pensions Until 2010: Generous pension payments in the past have reduced the need for personal savings.
- High Housing Costs: The substantial cost of housing drains resources that might otherwise be saved.
- Wealth Transfers and Parental Property Gifts: These reduce the incentive to save for property acquisition.
- Widespread Tax Evasion: Particularly among the self-employed, this leads to lower reported incomes and, consequently, lower savings.
Risks to Economic Growth
During the presentation of the study, the need for an increase in savings to fund investments from domestic resources was highlighted. This would provide resilience against external shocks and enable reinvestment of returns within Greece, fostering a virtuous investment cycle.
Bank of Greece Governor Yannis Stournaras noted that low private sector savings, especially among households, exacerbate the current account deficit, a core issue in Greece’s economic model. He stressed the importance of combating tax evasion, increasing bank deposit interest rates, bolstering the capital-funded pillar of the pension system, and enhancing financial literacy to address this problem.
Government Initiatives and Proposals
Finance Minister Kostis Hatzidakis highlighted the creation of the Auxiliary Capital Insurance Fund (TEKA) two years ago, which now includes approximately 370,000 new workers and €145 million in capital, expected to grow to billions.
Recommendations to Boost Savings
The AUEB study proposes several measures to increase savings rates in Greece:
- Fiscally Neutral Tax Interventions: For instance, increasing taxes on parental property gifts while reducing taxes on income from savings.
- Financial Literacy Initiatives: Efforts to improve public understanding of financial management.
- Employer Interventions: Encouraging employers to automatically enroll employees in additional pension or savings programs.
These measures aim to create a more robust savings culture in Greece, supporting long-term economic stability and growth.
