To assess the €2.2 billion package of economic measures unveiled by Greek Prime Minister Kyriakos Mitsotakis at the Thessaloniki International Fair, it is necessary to make a distinction that can easily get lost in the politics surrounding such announcements: Raising disposable income and tackling the high cost of living are not the same thing.
The two are closely connected. But they are not interchangeable. And that distinction points to the principal weakness of the government’s package as a response to the cost pressures confronting Greek households and businesses.
The philosophy behind the measures is straightforward. Through tax relief, increases in wages and pensions, lower contributions and targeted financial support, the government is seeking to return part of its available fiscal space to households and businesses. Such policies can increase net disposable income and provide meaningful relief to social and professional groups that have come under sustained pressure in recent years.
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The more difficult question is whether these measures will reduce the prices consumers and businesses actually face. On that score, the answer is far less encouraging.
For a household, what matters is not simply how many euros arrive at the end of the month, but how much those euros can buy. Living standards ultimately depend on real disposable income—the relationship between income and prices—not nominal income alone.
A worker may receive a pay increase, but if food, rent, electricity and services remain expensive, a substantial portion of that increase will simply be absorbed by the cost of living. The same applies to a government benefit or a tax cut. Both can leave the recipient financially better off. Neither automatically makes a supermarket basket, an apartment or essential services cheaper.
That is the central limitation of the measures announced in Thessaloniki when they are presented as an answer to Greece’s cost-of-living problem. They amount primarily to a mechanism for compensating households for high prices rather than one for bringing those prices down.
The distinction is equally important for businesses. Tax relief and reductions in certain charges can improve liquidity and give companies more financial breathing room. But taxes are only one component of operating costs. Companies must also pay for energy, raw materials, transportation, rents, financing and services.
If those costs remain elevated, pressure on production costs persists. Businesses then face a familiar choice: absorb the additional expense through lower margins or pass at least part of it on to customers through higher prices.
That creates a potentially troublesome cycle. Businesses confront higher costs, some of which feed into consumer prices. Households lose purchasing power, prompting the state to intervene with additional income support to offset the damage. Unless the underlying forces keeping costs high are addressed, fiscal policy risks repeatedly financing adaptation to expensive living rather than creating the conditions for prices to ease.
Electricity illustrates the problem. Mr. Mitsotakis has pledged a 30% reduction in electricity costs, but the target extends to 2029. Energy costs, meanwhile, are a burden today, both on household budgets and on the operating expenses of Greek companies. The government is therefore promising a significant improvement in one of the economy’s most consequential cost drivers, but over a three-year horizon rather than immediately.
Housing presents a similar challenge. Financial assistance for tenants raises their disposable income, but it does not by itself lower rents. Measures that improve households’ ability to purchase property can likewise help individual buyers. Yet if the supply of homes remains constrained, additional purchasing power can sustain—or potentially intensify—pressure on property prices.
A structural response to Greece’s housing problem therefore requires action on supply as well as demand. The government’s decision to raise the property-transfer tax for third-country nationals from 3% to 15% represents one attempt to move policy in that direction. But the broader test will be whether Greece can increase the stock of housing actually available to residents, particularly in areas where shortages have become acute.
There is also a mismatch in timing. The high cost of living is an immediate problem, while several of the government’s interventions will unfold gradually. That may be defensible from the standpoint of fiscal discipline. For households, however, the arithmetic is less forgiving. Today’s salary must pay today’s rent, today’s electricity bill and today’s grocery prices.
None of this means that the measures announced in Thessaloniki are economically insignificant. Higher disposable income matters, particularly after years in which inflation has eroded purchasing power. Tax reductions can improve incentives, strengthen household finances and provide businesses with additional resources. For many beneficiaries, the relief will be tangible.
But the package should be judged for what it can realistically achieve.
It can cushion the effects of Greece’s high cost of living. It can redistribute fiscal gains back to taxpayers and support incomes. What it cannot do on its own is solve the underlying problem of persistently expensive housing, energy, food and services.
That distinction matters because there is a limit to how long governments can compensate citizens for high prices without confronting the forces that keep those prices elevated. A durable cost-of-living strategy requires more than transferring additional income to households. It requires policies that expand housing supply, reduce structural energy costs, strengthen competition and productivity, and lower the cost base facing businesses.
