Greece spends the equivalent of 4%-6.6% of its GDP on allowances, which are often ineffective and contribute to a failure to address the social and economic disparity, according to a study carried out by diaNEOsis, a non-profit think tank, spanning from 2017 to 2024.

The findings, which focused on all allowance policies, excluding regular pensions, indicate that despite positive reforms, allowances lacked a targeted policy, as they were mainly extraordinary benefits implemented during crises (Covid, energy).

The report cites a World Bank report from 2016, which paints a bleak picture of Greece’s social welfare system, describing it as ill-equipped to address the country’s economic crisis and support its growing population of poor citizens.

The report notes that Greece’s welfare system is underfunded compared to its contribution-based social insurance and lags behind social welfare frameworks across the European Union. Allowances are often inadequate, and the system is highly fragmented, comprising over 200 small, poorly targeted social welfare programs.

Numerous benefits were streamlined, new measures like the 2017 rent subsidy were introduced, and organizations such as OPEKA (Organization of Welfare Benefits and Social Solidarity), which absorbed the former OGA (Agricultural Insurance Organization), were established to enhance the efficiency of welfare processes and minimize red tape, a long-standing problem that has plagued Greek public services for decades.

The Greek think tank highlights that multiple allowances distributed to numerous state services hindered the efficient payout to those in need. The report lays out some of the measures adopted during the Covid pandemic crisis, which cost roughly 33 billion euros. Between 2022 and 2023, allowances like Power Pass, Fuel Pass, and Market Pass were introduced to address rising energy costs. The aggregate cost of these amounted to over 9 billion euros, according to Bruegel, an economics think tank based in Brussels, accounting for 5.2% of the country’s GDP.

The report emphasizes that pensions, including those for old age, widowhood, and disability, play a pivotal role in mitigating income inequality in Greece, providing households with a stable monthly income stream, according to a recent analysis. The data reveals that pensions reduce the poverty rate before transfers by 25%, a figure higher than in other EU-15 countries. In contrast, other social transfers contribute a modest 3.8% to poverty reduction, underscoring the critical reliance on pensions to support Greek households.

Presenting possible solutions for a more effective allowance policy, diaNEOsis proposes, among other things, a simpler tax system that “solves more problems than it causes” and the adoption of a medium-term strategic policy for social welfare aimed at establishing a framework for social welfare and economic growth.