The Greek economy is expected to maintain its positive trajectory in the new year, staying on a similar course to 2025. There are a lot of uncertainties, of course – and big ones – but these mainly stem from the external environment.
Crises in the financial markets, in energy and in the geopolitical field cannot be ruled out and if they do erupt, they will affect our economy, too. Nevertheless, the baseline scenario is that real gross domestic product growth will remain steady at around 2% for the year – higher than the eurozone average – while inflation will recede slightly, to the 2.5% area. Unemployment will continue to improve, reaching levels similar to before the debt crisis and the financing of the economy, at various levels, will continue on a path toward normalization. No significant pressures are anticipated on the public finances, even though the room for maneuver in fiscal policy remains limited.
Even though the big picture may not show signs of uncertainty in terms of the current economic trends, it is important to take a close look at its different aspects. The big question, after all – for the economy and society more generally – is whether growth will be robust in the medium term. This will depend not only on the overall direction of economic policy, but also on how it addresses existing weaknesses and new challenges. The economic collapse 15 years ago and the inability to continue bankrolling the old production model was not some sudden accident, but an accumulation of choices and imbalances. It is important, therefore, to evaluate the key areas of interest where choices and developments are still open, focusing on those areas that have a direct impact on households: pensions, education, taxes, labor relations and housing.
Pensions
The pension system emerged as one of the main causes of the country’s bankruptcy, encompassing many of the shortcomings so prevalent across the Greek economy: distorted economic incentives, interventionism and cronyism, opacity, inconsistency and, of course, constantly transferring the cost burden onto the younger generations. As a result, interventions – many of them painful – on pensions became necessary under the fiscal adjustment programs during the crisis.
The most recent development concerning the system’s structure was the addition of a funded pillar alongside the pay-as-you-go one. Even though this was implemented on a limited scale – with approximately one-fifth of contributions and only for new entrants into the system – it nonetheless represented a step in the right direction.
The effect of this change on the special security system and the economy has been limited, mainly because it has not progressed yet to the stage of investing reserves, nor has there been any move toward offering insured individuals greater choice or transparency in monitoring the returns they earn. So one question for the new year is whether progress will be made in this direction or whether other, more short-sighted priorities will dominate, steering the pension system back to its pre-crisis state.
Education
Legalizing the operation of private universities (branches of foreign universities, basically) has been one of the biggest changes made recently in the area of education. It is widely seen as a positive step that scrapped a ban on such activities that stemmed from a perception that is now possibly quite dated. However, no matter how irrational a ban on an educational activity may seem, doing away with it alone neither comprises nor ensures an improvement of high education’s function or effect on the country.
How these new universities will operate will be important in the new year, but even more so whether anything will be done to bolster public universities, which are and will continue to serve as the pillar of the public education system. The interventions that have been carried out in the past few years have not improved the situation much. Many institutions in the periphery are struggling with depopulation and while others may be faring better, they are still seeing the distance separating them from institutions abroad widen. Both goals of attracting more high-caliber scientists and making the system more extroverted remain elusive. The steps taken in the next few months will determine whether our educational institutions will be given the support they need to ultimately contribute to the growth of the economy and the country as a whole.
Taxation
In the area of taxation, the biggest recent initiative involved legislation bringing into being a series of policies announced at the Thessaloniki International Fair in September and, more specifically, the decrease of income tax rates for employees and pensioners, with a further decrease for households with children. This intervention is expected to have a positive effect on the economy. The tax burden on incomes, especially in the lower brackets, was excessive and increased sharply, particularly when social security contributions are taken into account.
Greece taxes labor income from the middle brackets upward at significantly higher rates than most other European countries, creating disincentives for sustained employment and value creation. This significant problem was exacerbated by inflation in recent years. The tax rate reductions introduced with the new year substantially mitigate the issue. However, it is essential that this policy direction be sustained, especially in order to reverse the distorted incentives that encourage low participation in the labor market. Overall, the objective of a simpler and more stable tax scale remains, and any steps toward attaining this goal would be broadly beneficial.
Labor relations
In the labor market, and in the context of the drop in unemployment that has been recorded, the most remarkable development we saw in 2025 was the very recent agreement between the social partners for bolstering collective bargaining. Greece lags other European countries in terms of the share of labor covered by collective agreement, so any step toward reducing that distance is welcome. In the meantime, the way which institutionalized practices have been practically implemented has also had significant side effects on the economy, leading to distortions both in labor markets and, by extension, in many product and service markets.
How the relevant rules are applied in the new year will therefore be of critical importance to strengthen workers and raise wages where problems exist, without undermining the continued reduction of unemployment, the employment prospects of young people, or business competitiveness. At the same time, we still need important reforms to the structure and philosophy of unemployment, so that they support employment rather than discourage it, as is largely the case today.
Housing
Last but not least, the need to ensure adequate housing at affordable prices for the broader population remains a significant challenge. There are several factors driving the shortage of affordable housing that have appeared in the past few years. To begin with, supply did not keep up with the rise of demand as we emerged from the economic crisis and the deep recession. In contrast, the prolonged recession led to a freeze in the real estate market, suppressing the supply of residential properties. At the same time, despite Greece’s shrinking population, social trends have led to a rise in the number of independent households in Athens and a few other cities. The slow growth of bank credit and households’ real incomes – especially those of younger people – is exacerbating the problem, as is the lack of a sufficient number of adequately paid jobs in areas outside major urban centers. A large part of the problem can only be resolved gradually, as incentives are created to better align supply with evolving demand. Other interventions can, in the short term, alleviate the problem for those population groups that are under particular pressure. As the new year progresses, we will see whether a series of interventions will gradually improve housing affordability where the problem is genuinely acute, or whether existing dynamics will instead intensify it further.
There are other factors that can be added to these five, which will be important in determining the course of the Greek economy in 2026. These concern support for investments and experts, improving infant and childcare, boosting the infiltration of new technologies, technical upskilling and strengthening market competition.
Even if the trends that will shape the big picture – from a macroeconomic and fiscal perspective – are more or less predetermined and are unlikely to change because of anything other than external factors, the substance of any economy lies in its structure and in the incentives it provides. This is where it would probably be most useful for efforts to be concentrated in the new year.
Nikos Vettas is the general director of the Foundation for Economic and Industrial Research, and a professor at Athens University of economics and business.