MacroPolis

The media offensive launched last week to promote the latest rise in the new minimum wage in Greece clashed with the latest data released by Eurostat concerning per capita GDP in the EU in purchasing power terms (PPP), which placed Greece second from bottom.

The latest minimum wage rise of 50 euros that will take the gross wage to 880 euros, paid out in 14 salaries per year, was initially presented at the cabinet meeting on Wednesday. It was followed by the Labour Ministry releasing details from the labour market in Greece, focused on the progress since Prime Minister Kyriakos Mitsotakis took office in 2019.

The minimum wage is just one of the many painful stories of the debt crisis. In 2012 it was slashed from 751 euros to 586 euros in an attempt by the troika to boost competitiveness of the Greek economy in the absence of the tool of currency devaluation.

The minimum wage stayed at that level until 2019, when it was upped to 650 euros by the previous SYRIZA-led administration. After the setback of the pandemic, the minimum wage increased to 713 euros. This was the first increase by the current government. There have been three increases since.

The current framework for collective agreements in Greece, which were also suppressed at the behest of the troika during the debt crisis, keeps these minimum wage increases contained only to the subset of workers who receive the lowest statutory pay. This concerns fewer than 600,000 workers, and it does not move up the wage scale.

The government appears to have acknowledged this major limitation and, after an EU directive to bring coverage of workers by collective agreements to 80 pct of workers, it plans to make interventions to the strict framework of collective bargaining.

The current coverage in Greece stands at close to 30 pct, against an EU average ratio of 57 pct.

At the same time, the increases in the minimum wage since 2019 have barely improved the spending power of Greeks. The latest increase this week was needed to match the level of food prices, which have jumped by 33 pct in the period based on ELSTAT’s sub-component CPI index.

Housing costs have also been volatile, but rising consistently and peaking in 2022 due to the Ukraine conflict and the energy turbulence. Per ELSTAT, housing costs are up by 22 pct, with rents recently leading the charge with a jump of almost 10 pct year-on-year in February.

The impaired spending power of Greeks was captured by this week’s Eurostat release of per capita GDP in PPP, which essentially captures how far a euro in Greece will take a household compared to EU peers.

Excluding the sharp fall of 2020 due to the pandemic and the quick recovery that followed, Greece in 2019 was at 66 pct of the EU average in per capita GDP, rising to 70 pct in the latest 2024 data, suggesting that despite the narrative of strong economic performance thanks to the government’s policies, Greeks have barely managed to close the gap with the rest of the EU.

Bulgaria, which holds the bottom spot in the same metric, went from 55 pct in 2019 to 66 pct in 2024, despite the effects of the pandemic.

The comparison between the two countries illustrates the devastating effects that the debt crisis had on Greece as in 2009 the country was at 93 pct of the EU average and Bulgaria was at 43 pct.

Greece has been on a downward channel in this convergence metric up to 2020 and has made small gains since, but retains the second-to-last spot.