Greece’s Budget Is Thriving — But Inflation Is Paying the Bill

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Greece’s Budget Is Booming. So Why Do Households Feel Poorer?

On paper, Greece’s public finances have rarely looked better.

The latest budget execution figures released this week paint an impressive—almost exemplary—picture for 2025. Tax revenues have hit record highs. The primary surplus is among the strongest in Europe. Cash balances have swung into unexpected surplus. By conventional fiscal standards, Greece is outperforming nearly every other EU member state.

And yet, a simple question refuses to go away:
If things are going so well, why does no one feel it?

The Numbers Behind the “Success”

Start with the headline figures. Tax revenues reached €71.97 billion—an all-time record—exceeding the original budget target set in December 2024 by €451 million. The primary surplus came in just shy of €8 billion, close to 4% of GDP, comfortably surpassing even the most optimistic projections.

Even more striking is the cash balance. Instead of the forecast deficit of just over €2.5 billion, the state recorded a marginal surplus of €17 million—“money in the drawer,” as officials like to say.

These are the kinds of figures finance ministers dream of.

But they raise an obvious puzzle. None of the drivers that would normally justify such performance—rapid export growth, a surge in productivity, a meaningful expansion of the productive base—have materialised. Greece has not experienced an export boom. Manufacturing remains weak. Productivity growth is modest at best.

So where is the money coming from?

Greece’s Economic Comeback Is Real — But Built on Fragile Foundations

Inflation as a Fiscal Engine

The answer lies in an uncomfortable fiscal truth: inflation is not necessarily bad for the state—provided it is efficiently converted into tax revenue.

Greece’s budget overperformance is not the result of structural economic improvement. It is the product of persistently high prices, channelled through a tax system heavily dependent on indirect taxation.

As food, energy, rents and basic goods remain stubbornly expensive, VAT and excise duties generate ever-higher revenues. Inflation acts as a silent multiplier for the Treasury.

This mechanism is brutally effective—and profoundly regressive.

Indirect taxes fall disproportionately on low- and middle-income households, which spend a far larger share of their income on essentials. In effect, fiscal “success” is being financed by the erosion of purchasing power.

A Quiet Transfer of Wealth

The distortion becomes even clearer when looking beyond gross tax receipts. Despite record-breaking revenue collection, net budget revenues fell short of target by €921 million. Why? Because of underperformance in the Public Investment Programme and shortfalls in areas such as privatisation revenues.

At the same time, public spending came in significantly below projections, largely due to under-execution of transfers and other expenditure lines.

The result is paradoxical:
– Record tax revenues, driven mainly by indirect taxes
– Lower-than-planned total revenues
– Reduced public spending

This combination produces impressive fiscal balances—but only by transferring resources away from households and the real economy.

In other words, the state strengthens its balance sheet while society absorbs the shock.

Fiscal Excellence, Social Strain

This is why the budget’s “excellent” performance feels so disconnected from everyday reality. Households are being squeezed by a double bind: persistently high prices and an indirect tax system that amplifies those prices at the checkout.

The budget’s overperformance does not reflect a healthier economy. It reflects a more efficient extraction of revenue from consumption under inflationary conditions.

Over time, this model becomes self-defeating. As purchasing power erodes, domestic demand weakens. Small and medium-sized businesses come under pressure. Informality increases. Social cohesion frays.

And eventually, fiscal stability itself comes under threat.

An Unsustainable Equilibrium

The execution of the 2025 budget—much like that of 2024—reveals a fiscal architecture that prioritises short-term balance over long-term resilience. The state’s coffers are reinforced, but only on the condition that households steadily lose ground.

This may look like stability from a distance. In reality, it is a slow-moving destabiliser.

An economy cannot remain politically or socially stable when fiscal success depends on the continuous compression of living standards. When households feel poorer year after year, macroeconomic credibility alone is not enough.

The danger is not an immediate fiscal crisis. It is a legitimacy one.

The Real Question

Greece has proven that it can deliver textbook fiscal results. What it has yet to prove is that those results can coexist with rising living standards.

Until growth is driven by productivity, investment and exports—rather than inflation-fuelled taxation—the disconnect will persist. And so will the growing sense that economic “stability” is being achieved at the expense of economic survival.

A budget that works only on paper is not a success story.
It is a warning.