Ministries are gearing up to draft the 2025 Budget, which must align with the “tight” fiscal direction imposed by the new Stability Pact rules in Europe. Despite these constraints, the budget will provide an additional €880 million in social benefits compared to 2024, aimed at supporting vulnerable groups and small and medium-sized households.

A circular from Deputy Minister of Finance Thanos Petralias instructs ministries and general government agencies to record their needs and submit their requests by July 31, 2024. These requests must adhere to the target of a 2.1% GDP surplus and the new Brussels-imposed limit of a 3% annual increase in net primary government spending compared to 2024.

The 3% growth limit translates into a €3 billion annual increase in spending for 2025. However, this increase is largely offset by inflation, which raises the operating costs of the public sector and households.

Despite economic constraints, the draft budget must accommodate social policy interventions totaling €880 million. These include:

• A new increase in pensions based on GDP and inflation (€400 million)
• A reduction in insurance contributions by 0.5% (€225 million)
• The abolition of the professional fee for professionals (€120 million)
• The permanent return of the social security tax on agricultural oil with a new method (€100 million annually)
• The extension of the VAT suspension on new buildings (€20 million)
• An increase in the student housing allowance (€15 million)

Financial Strategy and New Tax Revenues

To balance the budget in 2025 and subsequent years (as outlined in the new Medium-Term Program for 2025-2028 to be sent to Brussels by September 20), the Ministry of Finance is heavily relying on new tax revenues from measures introduced this year. These measures’ results will be evaluated over the summer, with the Independent Public Revenue Authority’s services tasked with forecasting tax receipts.

The General State Accounting Office will analyze the data on the performance of these measures, which include:

• Mandatory POS and IRIS systems
• Universal myDATA application to control business expense deductions
• Prefilling and “locking” periodic VAT declarations based on monthly uploaded invoices
• Presumptive income for self-employment taxation
• Cash prohibition in property purchase contracts
• Measures to control fuel smuggling

According to the Petralias circular, “As long as there is information on updated yields of these interventions, the estimates of the cash receipts are adjusted accordingly. If a deviation in performance from the initial estimate is found, the competent bodies must provide sufficient justification (e.g., delays in issuing necessary regulatory acts, changes in calculation bases).” Any additional revenue beyond the expected €2 billion per year could allow for new tax reductions.