Thursday, 22 January 2015

The effectiveness of social transfer payments in reducing poverty in Germany, Greece and Portugal.

A rather important issue in today’s Europe is the social state. There is a lot of pressure on member states to balance their budgets and a lot of discontent along the process. One way to assist the process and maybe make it less painful is make social transfer payments more efficient (i.e. making sure their recipients are those who really need them). One good proxy of the efficiency of the process is how much poverty is reduced by it.

I have been looking for these data for a while (not efficiently enough as it turns out). The poverty threshold is defined as 60% of median income. I will post charts for Greece, Portugal and Germany.

source: Eurostat, Crisis Observastory

Greece had for a number of years (2005 – 2011) the lowest at-risk-of-poverty rate before social transfer payments.  

For the same period though that Greece had the lowest percent of its population at-risk-of-poverty compared to the other two countries (2005 - 2011), it also had the highest percent of its population at-risk-of-poverty after one takes social transfer payments into account.

source: Eurostat, Crisis Observatory

If this does not constitute policy failure then I don’t know what does. Also interesting to see is the net effect that social transfer payments have on reducing poverty in the three countries.

source: Eurostat, Crisis Observatory, own calculations

Efficiency has dropped for Germany since the second half of the 00s, has been mostly stagnant in Portugal and has been improving, albeit sluggishly, for Greece. Still, efficiency is pretty low for Greece and a first step could probably be to aim for the level of poverty reduction that Portugal has achieved.

Friday, 7 November 2014

What's next for Greek tourism

It is no secret that the apparent bottoming of Greece’s economy can be attributed solely to tourism. Hence, the million dollars question is what does the future hold for the sector and if its contribution will remain positive and that significant.

One, tourism-related, data-point that isn’t getting much attention lately is the prices trajectory for tourism-related services.

source: Eurostat

As you can see in the chart above, prices have almost stopped falling. How will it affect demand if prices start rising? I think the next chart could be interesting in that respect.

source: Bank of Greece, Eurostat, own calculations

The key takeaway if you ask me is that causality has changed. In the pre-crisis years featured in the chart, prices’ rise slowed when demand slowed. In the crisis years I think that demand rose when prices plummeted. One more fact for us to chew on is that during 2014, when prices fall decelerated, growth in demand also decelerated. Of course, the sector’s exports cannot keep growing with the same rate as they did in 2013 when the base effect was also at work. Also the slowdown evident in Europe could be having an effect here as well as a number of other factors.

To wrap this up, the question the answer to which Greece’s tourism sector is pondering right now is, what happens if prices in tourism-related services start rising (and they eventually will). I won’t get into the whole “the sector needs investments to improve the quality of services offered etc.” tirade since you’ve probably read the same points a million times already. Let’s wait and see what the future holds for the sector and since the sector is at present the sole driver of the Greek economy, for us as well.