With measures to combat inflation, financial relief for consistent debtors, and tax cuts, the government is responding to the pressure on incomes caused by rising inflation due to the war in the Persian Gulf.
This is a three-pronged economic policy approach that is expected to unfold with greater intensity in the coming months and has a common denominator: Boosting household income, which has been hit hard by the shock in energy prices and the inflationary domino effect triggered by the U.S.-Iran conflict.
Even if developments following Trump’s agreement with Iranian leadership lead to an immediate normalization of oil flows through the Strait of Hormuz, the assessment is that the disruptions caused to the global supply chain will not be resolved overnight. It will take time for the economy to adjust until inflation returns to pre-crisis levels, as ECB President Christine Lagarde predicted when she announced, two weeks ago, that euro interest rates would rise by 0.25 basis points.
Front Against Inflation
Against this backdrop, the government unveiled the new posokanei.gov.gr this week in an effort to provide consumers with a basic tool for comparing the prices of products on the shelves of Greek supermarkets. Through this platform, Greek consumers will be able to see the retail prices of the same products sold by multinational companies in Greece and other European countries. The fight against high prices is, in any case, a key government priority and is expected to be strengthened by measures that will be finalized in the near future. It should be noted that a cap on the profit margin for basic products sold in supermarkets is already in effect—a measure that had been announced to remain in place until the end of the month. In this context, market inspections conducted by the Independent Authority for Market Supervision and Consumer Protection are also a key tool. In presenting the platform, Prime Minister Kyriakos Mitsotakis stated that: “Unjustified prices—high prices in Greece compared to other European Union markets—cannot be easily tolerated unless they are explained with absolute clarity.”
Debtor Protection Measures
The new debt protection measures, particularly those aimed at vulnerable households, present a parallel challenge for the government. This involves not only the new 72-installment repayment plan but also changes to the out-of-court debt settlement mechanism, which lower the minimum debt threshold for eligibility to 5,000 euros. This means that more households will be able to take advantage of the favorable debt settlement provisions to save their primary residence. Another positive development is the selection of the provisional contractor for the Real Estate Acquisition and Leaseback Agency, which is set to begin operations in September, thereby expanding the framework for protecting debtors’ primary residences
New tax relief package
The three-pronged government policy to combat high prices is rounded out by the new tax relief package that the prime minister will announce at the Thessaloniki International Fair.These are direct tax cuts that will be finalized in the second half of August. Finance Minister Kyriakos Pierrakakis, government spokesperson Pavlos Marinakis, and Deputy Prime Minister K. Hatzidakis, have, in statements made in recent days, foreshadowed new tax cuts that will be included in the TIF package.
Mr. Pierrakakis stated that: “When the economy is doing better, the benefits are returned to society through tax cuts and income increases. We have done this in all previous years, and we will continue to do so now. And since the beginning of the year, we have implemented a major tax reform: 1.76 billion euros in tax cuts for wage earners, families, professionals, property owners, and businesses…this shows the direction we’re heading. It was the largest tax cut since the restoration of democracy. As for the Thessaloniki International Fair (TIF), what I can tell you is that decisions will be made once we have a complete picture of the fiscal data. The philosophy, however, will remain the same: every euro of permanent revenue generated by the economy’s improved performance will be reinvested in society.”
P. Marinakis stated that: “Of course, there will be further tax cuts. A significant package of additional tax reductions will be announced at the Thessaloniki International Fair. There is already room for one billion euros. Hopefully, it will increase a little more.”
According to Mr. Hatzidakis, the package of measures for the Thessaloniki International Trade Fair will aim to reduce direct taxes and support vulnerable citizens.
