September is considered a critical month for the preparation of the 2026 budget and the next support package, amounting to approximately 1.5 billion euros, which will be announced at next year’s TIF, with the aim of being implemented in 2027.
Concluding a new round of consultations with the European Commission’s officials (contacts are expected to take place late September), the economic staff should agree on the macroeconomic scenario for the next year as well as the fiscal targets. The most important factor will once again be spending.
The Recovery Fund will also be a decisive factor as it is possible that there will be additional needs in the Public Investment Program.
This, in turn, may overturn the initial plans for the percentage change in net spending, which will also affect the package of support measures in the following year, i.e. for 2027.
Sources of financing
The uncertainties that still exist regarding the 2026 budget are also the reason why the Prime Minister is expected to avoid, at this year’s Thessaloniki International Fair, references to support measures that can be implemented after 2026. However, the projections already made by the economic staff indicate that there may be a fiscal space available for the crucial year 2027 when elections are expected to take place.
Two main sources of financing:
First, the overperformance that occurred during the execution of the 2024 budget, which was able to finance this year’s support measures (the 250 euro allowance that will be given in November, as well as the rent subsidy). This overperformance has been divided into pieces and can finance support measures up to 2027.
On the other hand, a source of financing may be the permitted rate of change in net spending and the escape clause for military spending. Overall, the conditions are in place to create a new package of support measures for 2027, with a total budget equivalent to that of 2026, which will be announced in a few days (approximately 1.5 billion euros), but this requires achieving fiscal targets within 2026. Not so much in terms of primary surplus (and next year’s budget will foresee strong primary surpluses of just under 3%), but in terms of the rate of change in net spending.
The end of the Recovery and Resilience Fund in 2026
2026 is the year that the Recovery and Resilience Fund (RRF) will expire. Whether or not there will be an extension from the EU side is not something that is currently on the horizon. And the big question is whether an investment gap will be created by the projects already underway, which will have to be financed by the Public Investment Program, at the expense of course of the rate of change in net spending.
2025 performance will determine future spending
The forecasts for 2026 will be finalized based on the final data for 2025. Everything points to a growth rate of above 2% for another year and inflation between 2.2%-2.4% for the entire 2026. At the fiscal level, the first estimate is that the primary surplus will be close to 2.5%, resulting in a marginal deficit at the general government level. The change in defense spending also plays a crucial role. Although the escape clause will apply in 2026 (meaning that defense spending will not be counted in the calculation of the net spending index and its rate of change), this does not mean that these expenditures will not reduce the level of the primary surplus.
Public debt
Regarding the debt ratio, Greece is about to register another significant reduction in 2026. The debt-to-GDP ratio will fall below 140% and will converge with Italy’s. Depending on fiscal and macroeconomic developments in other European countries, it is likely that Greece will cease to be the country with the highest debt-to-GDP ratio in Europe as early as 2027, two years earlier than the official Greek target.
