Greece faces the toughest budget of the decade: ministries’ spending will plummet to a minimum

New “Medium-term budget planning 2026–2029″sent by the Greek government to European Unionis practically not discussed publicly, although its content is obvious shock even among those familiar with previous memoranda.

The document documents sharp cuts in spending across almost all ministries, demonstrating that much of the growth in recent years has been linked primarily to resources Recovery Fundrather than with a sustainable economic base.

From 2025 to 2029, the costs of most departments will decrease sharply. This trend concerns areas digital reform, agriculture, ecology, education, healthcare, tourism, culture, investment, infrastructure, foreign policy and defense. The economy as a whole will find itself in conditions of strict budgetary austerity: a reduction in government spending by 30% (-4.94 billion euros), a reduction in payments to civil servants by 5% (-753 million euros), an increase in taxes by 15% (+10.7 billion euros) and an increase in VAT revenues by 13.9% (+3.8 billion euros), despite the rate already being 24%.

At the same time, extremely low investment growth rates are predicted – only 0.9% in 2028 and 0.8% in 2029. The new primary surplus targets also remain high, at 2.8% of GDP in 2026 and 2.7% in 2027–29.

Biggest cuts by ministry

Ministry of Digital Governance will lose 60% of the budget (-669 million euros) until 2029. Ministry of Environment and Energy — 54% (–1.2 billion euros). Tourism – minus 53% of expenses. Culture and sports — minus 41% (–268 million euros).

Agriculture will face a 25% reduction in funding (-€438 million), which coincides with a reduction in European funds under the Common Agricultural Policy. Expenditures on development and strategic investments will also be cut by 25%.

Even after large-scale projects in recent years Ministry of Infrastructure cuts the budget by 12.3% (-398 million euros). Education loses 10.17% (-695 million), and healthcare — 3.1% (–238 million). At the same time salaries healthcare workers decrease by 7.5%, and in hospitals – by 12.5%.

Ministry of Foreign Affairs will receive 21% less funding (-95 million euros), including a 35% reduction in purchases of goods and services.

Ministry of Defense also under pressure: a reduction of 5.8% (-380 million), a reduction in wages by 2.7% and social benefits by 20%.

The cuts will also affect the social support system: expenses for family and housing benefitsas well as on Minimum guaranteed incomein 2026–2027 will be below the 2025 level.

In general, the share of ministries’ expenditures in GDP will fall from 25.35% in 2025 to 20.74% in 2029 – minus 4.6 percentage points. The most noticeable cuts will be in the areas of labor, education, defense, healthcare, environment and digital governance.

Greece’s new medium-term plan for 2026–2029 in fact, it puts the country into a strict budget diet regime, comparable to the era of memorandums, only without their official name.

The main problem lies not only in the volume of cuts, but also in the very logic of the program: the country is offered long-term stagnation modelWhere opportunities for growth are effectively cut in advance. Reduced funding for key areas means a gradual deterioration of public services, an outflow of specialists and increased dependence on external funds EU.

Essentially, this is the formation of a new “internal memorandum agreement”in which European Union receives guaranteed budget discipline, and Greece — limited development horizons, increased cost controls and the prospect of even more painful socio-economic pressure in the coming years.

What will this lead to?

Budget cuts for 2026–2029 is not a government “attack of greed” or a technical error. This is the result of a combination of hard EU fiscal ruleshigh Greek debtend of action Ταμείο Ανάκαμψης and demographic collapse.

Return to strict EU discipline

From 2024 in European Union updated rules are back in force Stability Pact. For countries with high debt, like Greecethey mean the obligation to reduce costs annually as a share GDP and hold high primary surpluses. Without this, refinancing government debt becomes more expensive, and access to cheap capital markets is called into question.

Hence the political decision: to “squeeze” government spending across all ministries, instead of radically reforming the tax system, which is lengthy, controversial and electorally dangerous.

The end of “oxygen” from Recovery Fund

Quasi-“growth miracle” of recent years relied on billions of Recovery Fund. Projects were financed through it digital transformation, infrastructure, green energypart of the programs education And health. Now this flow is almost drying up, and the budgets of ministries are suddenly “thinner” – not because someone “suddenly cut”, but because a temporary the source of money just ended.

On paper it looks like “catastrophic cost cutting”, in fact – a return to the level which the national budget is capable of pulling without external replenishment.

Debt, rates and tax pressure

Greece national debt remains extremely high, and global interest rates have risen since the era of “cheap money”. Debt servicing is increasingly costly, and Ministry of Finance forced to compensate for this either by raising taxes or cutting spending. In the new plan we see both: growth tax revenue And VATplus a landslide reduction in budget lines for most ministries.

Politically, the authorities prefer not to touch directly pensions and large social payments are electorally deadly. So they’re going under the knife investments, public sector salaries and operating expenses of ministries.

Demographics and the “budget of an aging country”

Added to this demographic crisis. The working population is declining, the number of pensioners is growing. This automatically increases the share of funds spent on pensions and healthcare for the elderly, and reduces space for investment in education, science, infrastructure and support for young families.

In other words, Greece is entering the “ageing country budget” phase, where more and more resources are spent on servicing the past rather than creating the future.

Not a “chance”, but a chosen corridor

Abbreviations included in new medium term planis not a temporary “belt tightening”, but a transition to permanent austeritybuilt into the rules EU and debt restrictions. The country is paying for years of ultra-high debt, dependence on Recovery Fund and for delayed reforms.

The problem is that such a course, along with an increase in tax pressure, is almost guaranteed to lead to even greater outflow of qualified personnelweakening public services and the deepening gap between “nice reports” and the real lives of citizens.

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