Officials at the Ministry of National Economy and Finance are keeping a close eye on the situation in the Middle East, particularly the possibility of an escalation in the Israel-Iran conflict. They warn that such developments could have ripple effects across key sectors of the Greek economy, potentially driving up inflation and eroding the purchasing power of households. At the same time, the government is looking into ways to tackle profiteering in the market, seeking to protect consumers from unjustified price hikes.
Despite the broader international uncertainty, Greece’s economic leadership remains committed to advancing a package of tax cuts and benefits that is expected to be formally announced at the Thessaloniki International Fair later this year. According to Finance Minister Kyriakos Pierrakakis, these plans will not be derailed by external developments, as the government’s primary focus is to reduce the tax burden on the country’s middle class.
So far, the government has managed to create a fiscal buffer of €1.5 billion for 2026, with the potential to exceed €2 billion if ongoing efforts to combat tax evasion and implement a digital labor card system prove successful. This financial headroom will support a range of policy interventions.
Among the measures under consideration are adjustments to the personal income tax system. The government is exploring the idea of indexing tax brackets to inflation to prevent modest wage or pension increases from pushing individuals into higher tax categories. Another proposal involves introducing a new, intermediate tax rate for annual incomes between €10,001 and €20,000, as well as raising the income threshold at which the highest tax rate of 44% takes effect.
There are also plans to revise the so-called “presumptive living standards” used to estimate taxpayers’ income based on their assets and spending habits. These changes aim to bring the system in line with current economic realities and reduce artificially inflated income assessments. A 0.5 percentage point reduction in social security contributions is also on the table, along with targeted changes to the way self-employed professionals are taxed, in an effort to absorb the impact of the recent increase in the minimum wage.
In the area of pensions, the government is reviewing the controversial “personal difference” mechanism — a technical feature of the pension system that can create disparities in pension amounts — with the possibility of partially or fully phasing it out. However, these decisions will depend on the availability of fiscal space and will be finalized following a detailed review of the country’s public finances at the end of the summer.
