SUBJECT: 16 questions-answers about the new budget and the economy

Athens,Greece.- Information note with 16 questions-answers about the new budget and the economy, issued by the Ministry of National Economy and Finance. Specifically, the note reads as follows:

1. What can we expect to change in Greece based on the budget?

The 2025 budget shows how the government manages to effectively balance fiscal responsibility with economic growth.

According to official data, next year Greece will record the fourth highest primary surplus in the European Union, reduce its total deficit close to zero and record the fastest rate of public debt reduction among the 27 member states.

The tax reduction policy implemented over the last five years has brought increased revenues, thanks to the significant growth of the economy – higher than the eurozone average – and the actions to fight tax evasion, the results of which are already visible.

Pro-investment policy continues strongly, with investment and exports expected to increase further in 2025. Public investment, which already more than doubled in 2024 compared to 2019, will rise even further, while unemployment is projected to return to pre-crisis levels . At the same time, compared to 2019, spending on health is increasing by 74% and on defense by 73%.

In summary, the 2025 budget reflects a balanced strategy that responds to national and social needs, corrects the consequences of the crisis of the previous decade and lifts Greece higher.

2. In the new budget it appears that the state collected an additional 3.7 billion in 2024. from taxes. How is it that tax revenues are increasing while you claim not to have raised taxes?

In fact, tax revenues are increasing without increasing taxes because the economy is growing and tax evasion is being reduced with interventions such as the interconnection of cash registers with POS and the implementation of myDATA adopted by the Ministry of Finance. This is the best way to increase public revenue, so that you can cut taxes or increase public spending in a targeted manner without the negative effects on growth of increasing tax rates. Specifically:

-In 2024, tax revenues are predicted to actually be higher by 3.7 billion. in relation to the budget. What is the reason for this increase?

* 1 billion above is VAT revenue, which is the result of curbing tax evasion and expanding electronic transactions, as both consumption and inflation are not significantly different from what the 2024 budget predicted.

* 1 billion also is the increase in personal income tax revenue due to falling unemployment and rising wages (revenue from taxation of the self-employed was already included in the 2024 target). It is indicative that the increase in wages in 2024 is estimated at 5.2% in 2024 against 3.8% that was foreseen in the budget.

* 1.15 billion in addition is the increase in revenues from legal entities (companies), which is also a result of the interventions to deal with tax evasion, and the extraordinary contribution to the refineries which was 300 million.

The remaining amount is basically related to increased collections due to the growth of the economy.

– For 2025, it is predicted that tax revenues will reach 69.2 billion. based on estimates for the growth of the economy, the further reduction of unemployment, the increase in wages, etc. No additional revenue is foreseen from further curbing tax evasion, so any progress on this point with the interventions to be implemented next year will lead to a budget overperformance.

In conclusion, in 2024 the State collected 1.8 billion. in addition (1 billion from VAT and 800 million from legal entities), due to the limitation of tax evasion, without increasing any tax and another 1 billion. from increasing wages and reducing unemployment. These are the tangible results achieved by the government on the tax evasion front, in action and not in words. In this way, not only positive economic results are achieved, but social injustice is also dealt with, some paying more because some others evade taxes.

3. With the growth and crackdown on tax evasion as you say, the budget shows higher surpluses than the target. So why doesn’t the government allocate more money for social policy?

First of all let us remind you that before Christmas there will be emergency measures to support the vulnerable thanks to the budget overperformance. And let’s add that there are two supplementary budgets in 2024 which, thanks to the outperformance of revenues, will more effectively support public investments for growth and social cohesion. All this is for the benefit of society.

We also have to remember that with this government, public sector wages have been unfrozen, pensions are increasing based on the GDP/inflation rule, on-call wages, uniforms, student housing allowance, birth allowance etc. are also increasing. And at the same time, the tax-free allowance for families was increased, insurance contributions were reduced and continue to be reduced, the ENFIA for insured homes is further reduced, the EFK is permanently returned to farmers and with a new system, while a tax exemption is established for empty houses that will be rented.

In addition to these, the main reason why the government requested and the European Commission accepted to increase the 2025 expenditure by a percentage higher (3.7%) compared to the original directions is precisely the overperformance of the budget. If it were not for the positive results in tax evasion and growth this year, the funds available for 2025 would be less and correspondingly less social benefits.

All this is done while respecting the fiscal targets linked to the annual increase in primary expenditure. The increase in employment, wages and, more generally, the standard of living is not possible without a healthy budget, especially in a country that still, despite its great reduction, has the highest public debt in the European Union.

4. You tell us that by tackling tax evasion you will reduce taxes. But for employees, pensioners and generally consistent taxpayers, taxation did not decrease despite the increased income from limiting tax evasion.

The government has already made significant tax cuts that boost citizens’ incomes and will continue on the same path that ensures development with social justice. Reference is made to the reduction of the import tax rate from 22% to 9%, which is an even greater benefit for the poorest. Also mentioned are the reduction of income tax especially for families with children, the reduction of ENFIA and insurance contributions, the abolition of the solidarity insurance contribution for pensioners. We cut 50 taxes during our first term, another 10 in the first year after the 2023 election and we are moving forward in 2025 to cut another 12 taxes.

After all, according to the official data of Eurostat, Greece in 2023 had the biggest reduction in terms of GDP among the “27” as the percentage of taxes in terms of GDP decreased from 42.8% in 2022 to 40.7% in 2023. The government by applying the right policy mix has managed to get more revenue, with lower taxes.

5. What are the salary increases that will be implemented until the end of the year and in 2025?

The following salary increases are foreseen for 2025:

1. Increase in pensions by 2.4%.

2. Horizontal increase of salaries in the State so that the introductory one does not fall short of the level of the minimum wage.

3. Incentive to attract doctors to troubled and barren areas.

4. Increase by 20% the compensation of night uniforms (police, fire brigade, coast guard, armed forces).

5. Increasing the student housing allowance for regional Universities.

6. Increasing the salaries of military school students.

In addition, in December 2024 the following aids will be given:

7. Extraordinary financial assistance to pensioners with a personal difference of 100 to 200 euros.

8. An additional installment to OPECA child benefit beneficiaries.

9. An increase of 200 euros for beneficiaries of e-EFKA disability allowances.

10. Supplement of 200 euros for beneficiaries of OPECA DISABLED benefit.

11. Supplement of 200 euros for uninsured senior citizens.

12. Additional 50% of the monthly allowance to beneficiaries of the minimum guaranteed income.

6. And which taxes will be reduced next year?

The 12 tax cuts in 2025 are as follows:

1. 1% reduction of insurance contributions from 1/1/2025.

2. Abolition of the pretense fee for freelancers.

3. Permanentization of the return of the EFK to agricultural oil.

4. Income tax exemption for vacant properties to be rented out.

5. VAT exemption for new buildings (extension in 2025).

6. Abolition of fixed telephony fee for optical fiber connections.

7. Exemption from insurance premium tax (15%) on health contracts for children up to 18 years of age.

8. Tax exemption of voluntary business benefits in favor of new parents.

9. Reduction of ENFIA by 20% for residences insured for natural disasters.

10. Independent taxation of NHS doctors on call at a rate of 22%.

11. Incentives for mergers and acquisitions.

12. Reduction of stamp duties on a range of transactions.

7. How is the pro-growth policy you say you are applying combined with the high surpluses? Since tight fiscal policy limits growth.

The government is implementing the right policy mix that combines fiscal prudence with growth. And this is proven with evidence:

Greece shows much higher growth rates than the EU and the Eurozone (2.3% in 2023, 2.2% in 2024 and 2.3% in 2025 with respective rates of 0.4%, 0.9% and 1.5 % for the EU).

At the same time, Greece in 2025 will have the fourth highest primary surplus in the entire European Union, a total deficit that will touch zero and the fastest rates of public debt reduction in all of the 27 EU member states. Something very important in a period of international turmoil.

We have a strong fiscal performance because we manage to get more revenue with less tax by reducing tax evasion and at the same time achieve higher growth rates than the EU.

8. What are the interventions for Health and Education in the 2025 budget?

In Health in 2025 spending will be increased by 74% compared to 2019. The increase is the largest compared to all other ministries. Especially the expenses for hospitals will be increased by 120% compared to 2019. In this direction, resources from the limitation of tax evasion were used. At the same time, an increase in the Public Investment Program and the Recovery Fund expenditure is foreseen by 285 million. in order to speed up the renovation of hospitals and health centers, as well as the necessary credits to cover the loss of EOPYY revenue from the reduction by one unit of health care insurance contributions.

For the Ministry of Education, the regular budget increases by 141 million. against the 2024 budget, the Public Investment Program outside the Recovery Fund increases by 115 million. against the 2024 budget. The Recovery Fund had increased absorptions in 2024 (305 million) and another 202 million is expected to be absorbed. in 2025.

9. What is the cost of the equipment programs implemented by the government?

The consolidation of the state’s finances allows the coverage of national needs such as the strengthening of equipment programs. Physical receipts – as, among other things, the receipt of the Belharra frigates is expected – are expected to increase by 746 million. in 2025 and to form 1.641 billion against 896 million in 2024. Total Defense spending in 2025 will be up 73% over 2019. The second largest increase in the budget after the increase in health spending. It is practical proof that the government supports the Armed Forces and shields Greece from any scheme.

10. What is your response to those who argue that wage increases are being dissipated by accuracy? Why don’t you proceed with a reduction in VAT so that prices fall?

No one is unaware that accuracy limits citizens’ purchasing power, and that the problem of inflation, not only in Greece but also internationally, has worsened in previous years. We fully understand citizens. But we must not ignore the following:

First, according to official data from Eurostat, during the period 2019-2023 the real GDP per capita in our country increased by 8.5% compared to 3.3% in the EU.

Second, average disposable income over the same period grew by 22.9% compared to 18% in the EU. The increase in average disposable income in Greece is considerably higher than the cumulative increase in prices (22.9% versus 13.1%).

Third, if we include 2024, the wage increase from 2019 to 2024 for a minimum wage worker is about 28%, while total dependent wages increased by 20%. Accordingly, in the period 2019 – 2024, the cumulative increase in the general price index is estimated at 16.5%. That is, earnings increased both among minimum wage workers and overall, offsetting increases in inflation.

Also in 2025, an increase in dependent labor wages by 3.4% and wages per employee by 2.7% is predicted, i.e. at a rate greater than inflation, which is expected to decline to 2.1%. And the European Commission for 2025 predicts an even greater increase in dependent labor wages by 4.1% and in wages per employee by 3.2%.

From all of the above, it is clear that despite the inflationary shock triggered by the energy crisis of 2022, workers’ wages have increased in real terms, which is also reflected in the increase in consumption, deposits and the reduction of private debt.

Incomes are boosted by permanent measures to cut taxes and raise wages such as those implemented by the government, by increasing investment that grows the economy’s pie, and by interventions to enhance competition. Magical solutions do not exist, nor do miracles happen. But progress is clearly being made.

In relation to the VAT, we have also pointed out that – as happened in other countries where the measure was implemented – it results in a reduction of the State’s revenue without benefiting the consumers but the intermediaries in the supply chain. In the current economic conditions, the improvement of living standards is better served by reducing direct income taxation, which also increases the disposable income of workers, and is more growth-friendly because of its positive effect on investment and the motivation of increased participation in the economy. labor market.

11. One of the main causes of the crisis was the current account deficit. Isn’t the fact that imports are once again growing faster than exports worrying?

We are following developments in this area very closely. Objectively, any developments are largely linked to extraordinary events. 2020 was the year of the coronavirus which hit our tourism revenue significantly, and the same applies (to a lesser but significant extent) to 2021. 2022 was the year of the energy crisis, which hit the current account hard. of the entire European Union, and part of this significant cost was carried over to 2023 as well.

According to the latest data, for the period January-August 2024 the current account deficit increased by approximately 1 billion. compared to 2023. This development is due on the one hand to the decrease (2.4%) in the value of exports of goods due to the drop in fuel prices and to an increase (1.9%) in imports which is mainly due to the increase in imports of industrial goods and equipment (due to increased industrial investment and production) and less in consumer goods. On the contrary, the balance of services (tourism, transport) shows a larger surplus (16 billion in 8 months against 15.5 billion last year)

It is recalled that from 2019 to 2024 investment in current prices has increased by 84%, which is the largest increase in the entire EU, exports in the same period have increased by 44% while doubling as a percentage of GDP compared to 2008 Also, in the period 2020-2022 the share of goods in exports significantly exceeded the corresponding share of services and 2023 the ratio was about 50-50, (while previously the ratio was 2 to 3). At the same time, the share of high-tech exports in total goods exports has increased.

The evidence therefore shows that the production model is changing at a significant rate. We will continue in the same direction, aiming for high competitiveness for Greek products and services, further increase in investments and even greater extroversion for our economy.

12. Why is the government rushing to pay off more of the public debt than we are obligated to service?

For two reasons. The first is that the repayment of the loans reduces the interest paid each year by the budget, i.e. the taxpayers. It is recalled that interest expenditure is of the order of 3% of GDP. The second reason is that early repayment sends an international signal of fiscal consolidation (at a time when many large EU countries are facing excessive deficits) and boosts, in troubled times, market and investor confidence. This in turn has positive effects on the Greek government’s borrowing costs, as confirmed by the positive effects of all early debt repayments from 2019 onwards. It is indicative that in 2024 the Greek ten-year bond trades with a lower yield compared to the Italian one and approaches the yield of the Spanish one. This reduction is passed on to the lending rates of the private sector, businesses and households. And lower lending rates for businesses means more investment, more employment and higher wages. At the same time, we must not forget the element of justice between present and future generations, which serves a correct policy of timely repayment of the high public debt. In any case, we remind all those who criticize that thanks to our own debt reduction strategy, but also thanks to the investment grade, the Greek taxpayers will pay 800 million. euros less over the course of a decade only for what the country borrowed in 2024,

13. However, debt remains the highest in the EU.

Our country achieved the fastest reduction of public debt ever recorded in the history of the eurozone, which is due to the growth of the economy and the prudent fiscal policy. The ratio of public debt to GDP was 209.4% of GDP in 2020 and is projected to decrease this year (2024) to 154%, and in 2025 to 147.5%. In other words, we are talking about a 61.9% reduction in GDP over five years. It is not hidden nor is it news that the high public debt has been a structural problem for our country throughout time and certainly the debt remains high based on European data. At the same time, we must not ignore the progress in recent years, which has made a significant contribution to the increase in GDP and employment, but will also continue in order to stop burdening the next generations and break the vicious cycle of fiscal crises. After all, there is no international media that does not recognize it!

14. While investments are increasing, they nevertheless remain lower than in Europe. Does growth come from consumption again?

Investments in Greece have increased significantly. From 2019 to 2024 as reported, investment in current prices has increased by 84%, the largest increase across the EU. Public investment in particular has increased by 150% between 2019 and 2025.

While in 2019 investment as a percentage of GDP was 11%, in 2025 it will reach 17.5% of GDP against 20.8% in the eurozone. So the investment gap of our country will be limited to 3.3 percentage points, while in 2019 it was over 10%!

We have certainly started from a low base, and our economy still presents a significant investment gap. But we have made significant progress in covering it, and this will continue in the coming year.

In 2025, investment is expected to emerge as a driving force of growth, replacing private consumption, which had the largest share in previous years. Specifically, the growth rate of investments is predicted to reach 8.4% in 2025, compared to 6.7% in 2024. Investments in equipment are expected to increase by 11.1% and in construction by 8.1%.

These are the results of the pro-investment policy implemented by the government in combination with the restoration of confidence in the prospects of the economy which is the basis for attracting investment.

15. The latest OECD report shows that we are in the last places in terms of wages. How do “Bulgarian wages” square with the government’s narrative of the economy doing well?

In principle, the latest figures show that between 2019 and the first quarter of 2024, Greece is experiencing one of the largest income increases among OECD countries. In Greece, real incomes, i.e. incomes after removing the effect of inflation, are increasing, and this is confirmed by the data published by ELSTAT and Eurostat, and is also reflected in the increase in consumption, deposits and the reduction of private debt. This can also be seen from Greece’s ranking in actual individual consumption in terms of purchasing power, where in 2023 our country is at 79% of the European average, above six other member states. And in this size, Greece shows a higher growth rate than the European average, as between 2019-2023 it showed a cumulative change of 23.4%, compared to 19.4% of the European average.

This does not mean, of course, that the gap created by the dramatic ten-year economic crisis has been filled, nor that Greece has achieved convergence. But it means that we have made important steps and we will continue on the same path as long as the same prudent fiscal and pro-investment policy is applied.

GDP per capita in current prices in 2024 has increased by 30% compared to 2019 and in constant prices (that is, excluding the effect of inflation) by 11%. And this despite the fact that we had to face two major crises: the consequences of the coronavirus and the energy crisis. This is the path to convergence and the government will remain on this path.

16. However, unemployment remains at a double-digit rate. Are you satisfied?

Unemployment in 2025 is predicted to decrease to a single-digit rate (9.7%) on an annual basis for the first time since 2009. According to ELSTAT data, it has already fallen below 10% since June 2024 and in September 2024 to 9 .3%, while in 2019 it was 17.9%. It is the largest reduction in unemployment in the whole of the EU. During this period, 500,000 new jobs were created, which (according to available data) are on average better paid than in 2019. Both businesses and the State contributed to this progress with the reduction of insurance contributions, training programs and employment policies. And these conditions, which are necessary for the creation of more and better paid jobs, were created by the correct economic and fiscal policy that we have consistently followed for the last five years. And we will move in the same direction in 2025, and in the following years.

Source: amna.gr