Enterprises are planning price increases, and workers are demanding higher wages (not benefits)

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Disappointing forecasts regarding the upcoming increase in prices for the products of Greek companies are intensifying, turning winter into another “rate season” for all industries.

Estimates are disappointing as domestic firms are planning further price increases over the next 12 months and only 10% expect cost cuts. The events come at a time of already high prices, when economic performance is at the top of people’s concerns, according to surveys.

Although most businesses show concern about the impact on their growth from the decline in disposable consumer income, they eventually move towards revaluation, passing on final prices. And all this despite the fact that in 2000 the purchasing power of the average salary in Greece was about 70% of the salary in the Eurozone, and in 2006 it increased to 87.2%. It stood at 86.4% in 2009, when the debt crisis began, and then fell sharply in subsequent years.

Since then, and especially since 2018, the rate has been declining gently (with the exception of 2020, when it increased slightly) and is at odds with other countries of the European South, which have characteristics comparable to Greece. In 2022, purchasing power stood at 56.9% of the eurozone average salary and was the lowest in the bloc.

Wages have not yet returned to pre-crisis levels

“Bonuses,” according to the study, are not an option for workers, and additional price increases are putting the fight for higher wages back on the agenda. In 2022, the average annual gross salary of an employee in Greece was 16,000 euros, which is 3.8% more than in 2021 (15.4 thousand euros) and 6.6% more than in the pre-pandemic period (2019 year: 15.0 thousand euros). However, it is still 23.9% lower than the historical maximum recorded in 2009 (€21.0 thousand), when the debt crisis began to unfold (while the purchasing power of the euro at that time was at least 2 times higher than in 2023. Editor’s note).

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If we adjust the time trend of the average nominal salary in Greece taking into account changes in the weighted average price level, that is, inflation, then the reduction in the purchasing power of employees in the early years of the debt crisis becomes even more obvious. In those years, inflation remained positive despite falling incomes.

The post-crisis recovery in real wages, according to Eurobank research, peaked in 2021 (at 68.4% of 2009 levels) and was replaced in 2022 by a 5.1% drop in real wages due to high rates of price level growth (HICP: +9.3%).

In the first half of 2023, the average real salary increased by 1.4% compared to the same half of 2022 (+6.6% in nominal terms).

Enterprises are planning revaluation, consumers are eating from deposits

Upward trends in world prices, especially for commodities, foreshadow further increases in prices, and their consequences are strongly reflected in wages.

According to the survey GSEE90% of private sector workers say they have reduced their consumption of staple foods. At the same time, 65% report they haven’t received a pay rise, and 25% say they’re working longer hours than usual – and of those, 48% say they’re not getting paid for it.

Concern over consumption and exports is widespread, with low levels of disposable income among workers highlighted by 30% saying they have no savings. At the same time, 37% are forced to use their savings to meet current needs for purchasing essential goods.

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At the same time, 64% of workers note that in 2023 they did not receive a salary increase, and 34% – that they received some increase. The vast majority of those who said they received some kind of increase were those making the minimum wage, which increased in 2023, according to surveys.

As for the most effective means of protecting the standard of living, 43% say it is an increase in wages, 33% – a reduction in VAT and excise taxes, 24% – price control. Not a single respondent chose the “benefits” option (0%).

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24% say they work more than normal working hours

72% say they do not work more than their usual working hours, and 24% say they work more. Of those who report working more, 48% say they are not paid for overtime.

Grant Thornton’s Greek Business Pulse survey found that 54% of businesses see persistent inflation pressures as the biggest drag on growth prospects, as they reduce consumer purchasing power. Another 36% consider this problem quite important. Due to expectations of rising commodity prices, the business expects its operating expenses to increase.

• 6 out of 10 entrepreneurs surveyed by Grant Thornton expect production costs to rise,
• 2 out of 10 of them claim that the increase in costs will exceed 10%,
• 80% of companies expecting an increase in production costs intend to include this fee in the prices of final products. In other words, they intend to implement corrective price increases to maintain their profit margins.

Only 27% of firms intend to make new investments

Greek entrepreneurs appear to be less optimistic about export growth (54% versus 59% last year expect export growth in the next 12 months), delaying new investments and focusing on domestic operations in an effort to reduce costs and improve internal functioning.

These are signs of a trend of risk containment, which is confirmed by other facts, for example, a sharp decline in the pace of credit expansion this year compared to 2022.

The survey records a decline of 10 percentage points (50% from 60%) in intentions to use Development Law incentives and a 5 percentage points (48% from 53%) decline in intentions to use Recovery Fund funds.

Just 27% of firms say they intend to make new investments in buildings and land (last year – 34%), while the intention to increase spending on digital transformation is also falling (53% from 61%).

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