Recent opinion polls show the governing party’s popularity slipping from 30.2 percent in June to 28 percent, narrowing its lead over the opposition PASOK party from 16.2 to 14.2 points.
The decline comes at a time of heightened legislative activity. The Ministry of National Economy and Finance has submitted to Parliament both the draft 2026 state budget and a flagship reform bill titled “Tax Reform for Demographic Renewal and the Middle Class – Support Measures for Society and the Economy.” The legislation introduces a wide range of measures affecting taxation, public sector pay, and social policy, representing one of the most ambitious economic packages of the current administration.
The proposed tax reform reshapes income taxation for individuals and businesses, with rate reductions for employees, pensioners, and self-employed professionals depending on family size and age. The tax rate for doctors’ on-call duties will be cut to 20 percent, and incentives for electronic payments will be extended through 2026. Families will benefit from targeted relief measures, including exemptions from imputed income for mothers during the first two years after childbirth or adoption, and reduced tax criteria for small businesses in rural communities with fewer than 1,500 residents. The government also plans to lower taxation on property income by introducing a new intermediate 25 percent bracket for earnings between €12,000 and €24,000.
Regional policy features prominently in the bill. From 2027, residents of small settlements will be fully exempt from Greece’s annual property tax (ENFIA), with a 50 percent reduction already planned for 2026 and special provisions for the border region of Evros. A 30 percent reduction in VAT will also be reinstated for the North Aegean islands, Samothraki, and parts of the Dodecanese with fewer than 20,000 inhabitants. Additionally, the suspension of VAT on unsold newly built properties will be extended for another year.
The legislation also introduces €150 million in investment incentives aimed at boosting industrial production, including the manufacturing of motor vehicles and defense equipment. Companies in these sectors will be offered enhanced expense deductions and faster licensing procedures. At the same time, the government plans to abolish the subscription television levy as part of its efforts to simplify and modernize the tax system.
A key element of the bill is the overhaul of pay structures for Greece’s Security Forces. The new system establishes four categories, twenty salary levels, and new allowances covering leadership, responsibility, and service in border areas. The measure is expected to cost €127 million annually. The bill also provides for higher allowances and improved benefits for staff at the Ministry of Foreign
Affairs, including full tuition coverage for their children and the removal of the cap on overseas service compensation. Prison staff will receive a special allowance, and new mobility options will be created within the public sector.
Further provisions include the tax exemption of the “library allowance” for university faculty and researchers, while holders of integrated postgraduate degrees will be entitled to two additional salary steps. The bill also grants the Hellenic Film Centre an annual subsidy of €11 million to strengthen Greece’s growing audiovisual industry.
According to the General Accounting Office, the total fiscal impact of the package will exceed €1.5 billion per year, largely due to the combination of tax cuts, higher wages, and expanded social support measures.
