The pauperization of Greek households in numbers other than GDP, and the remedy's problem demonstrated

**Warning** this is a bit technical and number heavy and boring for most

It is almost unthinkable that after 4 years of a debt program and of "reforms" things have not yet stabilized for the greeks. The level of the adjustment, which now is well beyond the initial need for a c. 15% drop in the government spending part of GDP, exceeds the great depression and is most pronounced at the household level where disposable income has dropped quicker than GDP. GDP is a measure of production, not a disposable income or standard of living index, and understates the effect on people. GDP may have been an adequate measure of the drop in income in the 30s, where government budgets started from a healthy point. In the case of Greece, the effect is more evident in the disposable income figures rather than GDP.

The Greek Statistical Authority today relased a report on household income and consumption for 2013: http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/A07061/PressReleases/A0706_SEM91_DT_AN_00_2013_02_P_EN.pdf


Here are the points to take away:

Household disposable income fell a total of 30% between 2010 and 2013, while consumption by 22% while GDP at 24%. The biggest  drop in disposable income of 10.2% was in 2013!

Households dipped into their savings to fund the difference in 2013, with the gross savings rate dropping to -6% from positive before.

At some point this negative savings rate will also show in consumption with a time lag and reduce GDP which in 2013 was saved by the negative savings rate.

During the same period, government spending fell a total of 22%. So the main responsible of the crisis, the spendthrift Greek state, adjusted much less than households, which explains why GDP had to fall much more than was required if the adjustment had been done at the source of the problem. This is further empirical evidence in relation to the post of 26/2, point 3, on lessons from the greek debt crisis, where the argument is that the adjustment could have been done with much less pain if it had been done at the source of the problem.