Since Eurostat announced the Greek general government accounts for 2013 yesterday I would like to take a closer on the actual story so far. My source will be ELSTAT Quarterly Non-Financial Accounts of the Greek General Government.

Greek General Government Revene

Greek General Government Revenue

Greek General Government Expenditure

Greek General Government Expenditure

First let me state that the data released from ELSTAT are on a accrual basis (and not on a cash basis) so they should reflect actual transactions and liabilities of the Greek general government. Using VAT revenue as a proxy for nominal GDP developments one observes that the change in revenue was -8.5% during both 2012 and 2013 something that should reflect the large drop in nominal GDP through 2013 (the same is also evident from the -7.8% drop in social contributions).

Looking at individual categories in more detail:

  • Revenue: Both production and income taxes show a significant drop of €1.1bn and €1.9bn (for a total of €3bn) while social contributions fell by €2bn. What actually increased substantially was investment grants from EU by €1.42bn.
  • Expenditure: Fortunately Gross Capital Formation remained more or less stable during 2013 while intermediate consumption was lower by €1.5bn and compensation of employees kept its multi-year pattern with a further fall of €2.2bn. Interest expenses dropped significantly in 2013 with a drop of €2.5bn (after a fall of €5.3bn during 2012). What showed an impressive change was social benefits which fell by €5.9bn (compared to a fall of €3bn during 2012) despite the high rate of new pension applications and the deep recession.

All in all, the 2013 recession took its toll on the revenue side while the drop in expenditure came mainly from social benefits but also from consumption (both intermediate and compensation of employees) and interest payments. Investment grants contributed significantly to government revenue and plugged part of the ‘revenue hole’ from the recession. I find the large drop in social benefits quite puzzling and I ‘m not so sure if the current expenditure base can be sustained in the future. Among other factors there is talk that a huge backlog of pension applications has been created which obviously should be considered as future government liabilities.