A draft of the 2025 Greek state budget will be tabled on Monday, October 7, with a goal of a primary surplus of 2.5% of GDP (up from 2.4% in 2024, exceeding the initial target of 2.1%).
The draft will be submitted amid the escalating conflict in the Middle East. A major issue of concern is how the Israel-Iran conflict will play out with pundits projecting a surge in oil prices.
While making forecasts with any degree of confidence remains highly optimistic as two wars are raging and the prospect of general conflagration in the wider Middle East looks increasingly likely, Greek authorities have reportedly factored in oil prices at $80 per barrel.
The plan includes a cap on spending increases at 3.7 billion euros, as required by the new EU fiscal rules starting from January 1, 2025. Of these 3.7 billion euros, 3.6 billion euros have already been “covered” by measures announced by Prime Minister Kyriakos Mitsotakis at the Thessaloniki International Fair (TIF) and later detailed by the government’s economic team.
The remaining margin of 100 million euros suggests that the government is unlikely to introduce any additional benefits for citizens, even if the situation worsens.
A critical issue is how next year’s budget will be managed, as the current one is largely supported by the overachievement of tax revenue targets, partly due to inflation.
This is particularly important because, in the first year of implementation (budget 2025) of the new fiscal rules of the Stability Pact, there can be no spending overruns. If a country violates the terms, it will enter the excessive deficit procedure. Following that, it will have room to offset an overrun by cutting spending in the following year.
