Fewer taxes, more revenue
The first draft of the 2025 budget follows the path of the Midterm Fiscal Plan to 2028
The 2025 draft budget that Minister of National Economy and Finance Kostis Hatzidakis is tabling on Monday in Parliament provides for fiscal interventions of 1.1 billion euros, including the reduction of social security contributions, the abolition of the fee for practicing a profession and a horizontal increase of €20 in civil servant salaries.
It is a draft drawn up against the backdrop of ongoing wars and therefore contains a high degree of uncertainty as to its implementation, since projections for expenditure and revenue may be overturned.
At the same time, it is also a draft that has been formulated closely following the provisions of the 2025-2028 Midterm Fiscal and Structural Plan agreed with the European Commission. The plan was presented last month, in accordance with the new rules of the EU Stability Pact.
In this context, it is a draft with conservative predictions. It is the beginning of a four-year path which aims to reduce the country’s debt from 153.7% of GDP this year to 133.4% of GDP in 2028. To achieve this goal, Greece has agreed annual spending increase limits with the Commission. For 2025, this limit is 3.7% or €3.7 billion. According to reports, the budget to be presented will increase spending by €3.6 billion, just €100 million below the limit. How easy it is to exceed this limit is shown by the fact that this year an increase in spending of €1.1 billion was budgeted and will eventually reach €2.6 billion.
Of course, this difference is covered by the overperformance of budget revenues. In fact, the primary result of this year’s budget will be higher than the initial forecast – i.e. 2.4% of GDP, instead of 2.1% of GDP.
For 2025, the primary surplus is projected to reach 2.5% of gross domestic product.
The €3.6 billion increase in spending is split between an increase in regular budget spending of around €1 billion, equipment spending of around €850 million, and pensions of around €1 billion, of which €600 million concern new pensioners and €400 million concern pension increases, expected at 2.20-2.45%.
