Evolutions in Consumption Inequality and Poverty in Greece: The Impact of the Crisis and Austerity Policies

Greece is the country hit hardest by the crisis and subsequent fiscal consolidation strategies, suffering a cumulative output loss of about 30 percent since 2008. The present paper presents evidence that along with declining average living standards, consumption inequality has seriously grown, fueled primarily by a disproportionate drop in the consumption levels of what can be considered the middle class. Although poverty has not significantly risen in relative terms, it climbs to around 45 percent once the poverty threshold is anchored to pre‐crisis levels. Furthermore, significant indirect tax hikes have further increased inequality in consumption expenditure. The paper also shows that several reforms launched in the name of reducing labor costs, broadening the tax base or rationalizing the targeting of social benefits have had detrimental effects on one of the most vulnerable population groups, namely families with children, thus implying that the social consequences of the crisis will be long‐lasting.