New Greek tax, development incentives will support economic growth

Prime Minister Kyriakos Mitsotakis this month unveiled a €1.7 billion package of tax breaks and other measures to boost the spending power of Greek households, support Greek exporters, and increase investment in manufacturing.

Boasting a larger-than-expected fiscal surplus – thanks to strong economic growth and improved revenue collection – the government is focused on easing cost of living pressures for the middle class, young workers and pensioners by lowering income and property taxes.

The measures, which will take effect from 2026, also have a clear supply-side, growth-oriented dimension, say government economists. By providing incentives for labor market participation and higher productivity, particularly among the young, middle-income earners, and families with children, the new measures will increase long-term output growth and help address Greece’s demographic challenges.

“Thanks to available fiscal space, new permanent expansionary fiscal measures were announced at the Thessaloniki International Fair in September,” the Bank of Greece said in its monthly note on the Greek economy. “These measures are expected to lead to higher than projected growth in 2026 and 2027.”

But the government is also introducing or extending a series of incentives to boost domestic investment in defense, promote innovation, and support small- and medium-sized enterprises. Among them is a plan to double the tax deduction, up to €150 million, on expenses made in connection with investments in defense and vehicle manufacturing; a €200 million package to strengthen extroversion of SMEs; and a new fund to support pharmaceutical innovation.

The Hellenic Development Bank will also offer an additional €780 million in concessional loans to SMEs starting next year, which will include up to €170 million to support small farmers and food producers, €500 million in loan guarantees for select SMEs, and €41.4 million to support micro- and small-businesses in the filing of patents and the commercial development of those patents.