New Alarm Bells for Private Investments in Greece Amid Household Savings Decline

The economic strategy the Greek government aims to implement may heavily rely on foreign, public, or private investments. However, recent Eurostat data on household spending and savings paint a concerning picture. The correlation between investment and savings has been emphasized by Bank of Greece Governor Yannis Stournaras. The mechanism is straightforward: if Greek households do not save and instead consume nearly all their disposable income, banks lack liquidity to finance private investments, creating a bottleneck for Greek growth. Money does not circulate through the economy, jobs are not created, and value production stagnates. Despite a marginal increase in household investments by 0.2%, Eurostat data reveals that Greece recorded the second-largest decline in savings rates in Europe in 2024 (-1.3%), only surpassed by Belgium (-2%). European averages starkly contrast with Greece’s performance, as the Eurozone saw a slight drop of 0.1% while the EU witnessed a marginal rise of 0.1%. This decline partly stems from increased private consumption, which slightly exceeds European averages with a 0.5% rise. Coupled with a significant fall in net disposable income (-1.1%) and a 2.8% rise in gross fixed capital formation, this underscores the gap in savings. Ideally, savings should increase due to reduced tax evasion, as explained by Stournaras. Yet, despite warnings that private savings must reach 9% of GDP for sustained high growth, progress remains elusive. With trade wars looming and potential recession threatening the Eurozone, uncertainty clouds the future of private investments. Consequently, the state recognizes the need to bridge potential gaps with public funds. Additionally, Greek businesses’ ability to invest and grow is constrained by factors like the digital divide compared to the EU. Unless urgent measures are taken, Greek firms risk losing competitiveness against their European counterparts. To enhance the business and investment climate, emphasis must be placed on digital infrastructure and full population access to high-speed internet, alongside digitizing public services.