## 1. Growth—Robust Expansion

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### Context: glass half full
- Per capita GDP has risen by 26 percent cumulatively since 2020, reaching 92 percent of the pre-Global Financial Crisis (GFC) level.
- VAT compliance gap declined to about 9 percent in 2024, down from 24 percent in 2019.
- Primary surplus surged to close to 5 percent of GDP in 2024-25 (highest in the EU).
- Public debt-to-GDP decreased by about 65 percentage points since the peak in 2020.
- FSAP (2026) finds systemic risks in the financial sector were low prior to the war and remain manageable.
- Persistent gaps:
  - Per capita income remains more than 15 percent below the pre-crisis trend.
  - Low overall investment, rapid population aging with low labor force participation (LFP), and sluggish productivity growth.
  - Household and corporate balance sheets remain weak; sizable share of households faces low disposable income and limited emergency savings, aggravated by high housing cost burden.

### Recent developments: robust performance with NGEU support
- Real GDP growth and labor market:
  - Real GDP grew by 2.1 percent in 2025.
  - Unemployment rate declined to 8.3 percent in 2025Q4.
  - Labor force participation rate rose to 77 percent.
- Inflation and prices:
  - Annual inflation of 2.9 percent in 2025.
  - Headline inflation rose to 4.6 percent (y/y) in April 2026 as higher global energy prices affected domestic prices.
- External sector:
  - CA deficit narrowed to 5.7 percent of GDP in 2025, down from 7.2 percent in 2024.
  - External position in 2025 assessed as moderately weaker than consistent with medium-term fundamentals and desirable policies (Annex I).
- Fiscal and public debt:
  - Primary surplus remained high at 4.9 percent of GDP in 2025.
  - Early repayment of GLF loans to euro area countries (€5.3 billion, 2.1 percent of GDP).
  - Debt-to-GDP fell by about 9 percentage points in 2025 to 146.6 percent, down from 210 percent in 2020.
- Credit, banking, and housing:
  - Credit to the private sector grew by 7.7 percent (y/y) in March 2026 (excluding write-offs and valuation effects).
  - Household credit growth 2.8 percent (y/y) in March 2026; mortgage growth turned positive for first time since GFC.
  - NPL ratio in significant institutions fell to 2½ percent in 2025Q4.
  - System-wide CET1 ratio around 15½ percent.
  - House prices rose by 7¾ percent in 2025; cumulative increase since 2016 exceeds 85 percent; house prices appear moderately overvalued by about 10 percent.
  - Rent prices rose by 10 percent in 2025.
- Structural and energy progress:
  - National cadaster nearing completion; full operationalization expected in early 2027.
  - Judicial reforms halved time to decisions in civil cases.
  - Labor market reforms include codification of labor legislation and fast-track hiring procedures.
  - Renewable electricity production expanded; wholesale electricity prices fell to below the median in recent months.
  - Strategic partnership signed to position Greece as regional LNG hub and support prospective offshore natural gas exploration in the Ionian Sea.

### Outlook: moderating momentum amid global headwinds and structural drag
- Growth projections:
  - 2026: 1.8 percent (0.3 percentage points lower than anticipated prior to the war).
  - 2027: 1.7 percent despite expiration of NGEU funding and a contractionary fiscal stance.
  - Medium term: 1.6 percent.
  - Investment-to-GDP ratio expected to rise by ½ percentage points but remain below euro area average.
- Inflation projections:
  - Headline inflation projected to rise to 3.5 percent on average in 2026—0.9 percentage points higher than pre-war projection.
  - Peak around 5 percent (y/y) in the second half of 2026, then disinflation expected.
- External sector:
  - CA deficit expected to widen near term due to higher energy imports, then gradually narrow to around 4 percent of GDP in the medium term.
- Risks:
  - Downside growth risks: protracted Middle East war, escalation of geopolitical tensions, trade fragmentation, delays in NGEU project execution, delayed structural reforms, adverse climate shocks.
  - Upside growth risks: stronger effects of fiscal package and reforms, stronger-than-expected euro area recovery.
  - Inflation risks skewed to the upside: higher global commodity prices, wage growth outpacing productivity, costs from climate shocks.
- Severe scenario (April 2026 WEO severe scenario):
  - Growth slows to about 1¼ percent in 2026 before reverting to baseline.
  - Annual inflation will reach 5 percent in 2026 and stay persistent.

### Staff appraisal summary
- Growth is expected to moderate due to elevated energy prices and weaker external demand amid the war in the Middle East.
- Risks to the growth outlook are tilted to the downside; risks to inflation are tilted upside.
- Policy priorities include sustained growth-friendly fiscal prudence, well-targeted temporary energy support if needed, full utilization of EU funds to sustain public investment, and ambitious structural reforms to boost productivity and LFP.
- Next Article IV consultation recommended on the standard 12–month cycle.

### Balance sheet vulnerabilities and distributional concerns
- Households:
  - Liquid assets (in percent of GDP) have declined amid steady deleveraging.
  - Two-thirds of households declare less than three months of emergency savings.
  - High housing cost burden; prevalence of variable-rate mortgages increases exposure to income and interest rate shocks.
- Corporates:
  - Balance sheet repair progressed unevenly; around 20 percent of corporate debt is held by firms with interest coverage ratio below one.
  - A drop in profitability in geopolitically-sensitive sectors, or rises in interest rates/risk premia, could stress illiquid firms and delay SME crisis debt resolution.

### Policy discussion: toward balanced and sustainable growth — fiscal policy
- New fiscal package (effective January 2026):
  - Broad-based personal income tax (PIT) rate cuts; additional rate cuts for low- and middle-income families with children and young workers.
  - Estimated fiscal cost €1.76 billion (0.7 percent of GDP) in 2026.
  - Includes pension enhancements, public sector wage measures, and housing measures (tax relief on rental income, VAT and tax incentives for new construction, property tax reductions in small municipalities, incentives to bring vacant properties into rental market).
  - Staff view: growth support welcome but monitor inflation; moderate fiscal expansion if inflation deviates significantly from baseline.
- Fuel and energy support package:
  - Means-tested Fuel Pass (lump-sum subsidy) without price changes in gas stations until May.
  - Diesel subsidy at the pump (€0.2 per liter including VAT) until May.
  - 15 percent fertilizer subsidy until August.
  - Regulatory cap on profit margins for fuel (€0.12 per liter) and selected essential goods (at 2025 levels).
  - Emergency support for families with children; raising income ceiling for pensioners to receive financial aid.
  - Estimated cost about 0.3 percent of GDP, partly offset by higher online gaming tax revenue.
  - Staff: package is limited and targeted; caution that price subsidies should not blunt necessary demand response; any extension should strengthen targeting.
- Fiscal baseline and trajectory:
  - Primary surplus projected at 3.6 percent of GDP in 2026 (down from 4.9 percent in 2025).
  - Medium-term primary surplus projected at around 2¾ percent of GDP despite further planned social security contribution reduction of 0.5 percentage point in 2027 and impact of fiscal package.
  - Authorities plan to fully repay GLF loans by 2031—10 years ahead of schedule—using part of the sizable cash buffer.
  - Public debt-to-GDP ratio projected to fall by more than 30 percentage points to about 110 percent by 2031, a cumulative decline of nearly 100 percentage points from its peak in 2020.

### Energy shocks and fiscal stance
- Automatic stabilizers should be the primary policy response to larger energy price shocks, using the fiscal buffer from the stronger-than-expected primary balance in 2025.
- Temporary and well-targeted energy support could be extended or expanded within the prudent medium-term fiscal framework while managing additional inflationary pressures.
- Authorities could extend or expand well-targeted support for those most affected—including through the means-tested Guaranteed Minimum Income (GMI) scheme—while preserving energy price signals.
- The path of the medium-term primary balance should be kept unchanged to preserve debt sustainability and contain risks of excess demand, widening CA deficit, inflationary pressures, or un-anchoring inflation expectations and wage growth beyond productivity growth.

### Investment and EU funds absorption
- By end-2025, NGEU grant disbursement reached 66 percent of the committed amounts.
- Absorption of other structural EU funds under the National Strategic Reference Framework for 2021-27 stood at about 20 percent.
- Greece faces an investment gap relative to the euro area of around 4 percentage points of GDP, especially in construction and intellectual property products (including R&D, software, and database).
- Recommendations:
  - Fully utilize available EU funds beyond NGEU to maintain public investment and catalyze private investment for capital deepening.
  - Address fragmented legal framework and streamline secondary legislation on public investment to accelerate implementation.

### Pensions, social spending, and targeting
- Long-term pension spending projected to decline by about 2.5 percentage points of GDP between 2022 and 2070 due to reforms since 2010.
- Any future pension increase should follow the established indexation formula to preserve long-term sustainability; excessive increases in public-sector wages should be avoided.
- Key social performance gaps:
  - PISA scores have declined and are now below OECD averages in mathematics, science and reading.
  - The share of population reporting unmet needs for medical care is highest in the EU.
  - Housing affordability challenges remain acute, particularly for younger and low‑income households.
- Recommendations:
  - Advance the one-stop portal for social benefits linked to employment registration.
  - Strengthen the means-tested GMI scheme by expanding coverage, improving targeting, and reinforcing job integration to raise labor force participation.

### Fiscal structural reforms
- Phase out inefficient and regressive tax expenditures; establish a systematic, multi-year framework for evaluating tax expenditures.
- Future tax-reduction measures should be guided by dedicated impact assessments.
- Strengthen public procurement: streamline and centralize procedures, strengthen oversight, expand e-procurement.
- Regularly adjust PIT parameters to avoid bracket creep by establishing a transparent, rules‑based mechanism while preserving progressivity and targeting relief to low- and middle‑income households, particularly families with children.

### Financial sector: overall assessment and policy recommendations
- Financial stability risks were low prior to the war and remain manageable; vigilance warranted.
- Concentration and legacy exposures:
  - The ten largest common NFCs account for 81 percent of aggregate Tier 1 capital, net of credit risk mitigation.
  - Distressed debt of about 30 percent of GDP is still under recovery by credit servicers.
  - Deferred Tax Credits (DTCs) represent 44.5 percent of CET1 in 2025Q2.
- Macroprudential and BoG actions:
  - Formalize interagency coordination by operationalizing the Systemic Stability Council (SSC).
  - Central credit register will support macroprudential stress testing and policy refinement.
  - BoG increased the CCyB by 25 bps to its positive neutral (PN) CCyB level (0.5 percent), effective October 2026.
  - Monitor and be ready to refine Borrower-based measures (BBMs) if housing-credit pressure intensifies.
- Credit servicers, insolvency, and capital quality:
  - Strengthen BoG oversight of credit servicers and improve insolvency implementation (judicial specialization, court resourcing).
  - Four SIs adopted a voluntary accelerated prudential amortization scheme of DTCs projecting full amortization by 2031-33.
  - Codifying accelerated amortization in law would help address the sovereign-bank nexus across all banks.

### Financial safety net and AML/CFT
- Reinforce ELA framework, strengthen deposit insurance target funding levels and establish a public backstop.
- BoG should ensure in‑field testing for AML/CFT across banks and payment institutions commensurate with risk; progress needed to digitalize the Register of Shipping Companies and improve supervision of high‑risk professions.

### Housing policy: diagnosis and recommended actions
- Structural issues:
  - High housing cost burden despite outright ownership of more than 60 percent.
  - About 35 percent of the housing stock is not used as primary residence; many vacant properties out of the market due to liquidity constraints and renovation costs.
- Short- and medium-term policy recommendations:
  - Mobilize existing housing supply and adopt targeted measures to improve affordability.
  - Target demand-side measures (e.g., rent refund scheme) with clear sunset and evaluation features; consider phasing out the VAT exemption on new construction.
  - To support long-term rental (LTR) supply: assess Golden Visa threshold changes, tighten STR regulation, provide tax incentives for LTR, expand Property Ownership and Management Registry (MIDA), revise minimum lease durations, reduce dispute resolution delays, and introduce rental payment guarantee schemes.
  - Shift toward durable supply measures: scale up renovation programs (including energy efficiency), introduce vacancy surtaxes, expedite regularization, and develop social rental housing programs combined with budget‑neutral incentives for affordable-unit developers.
  - Coordinate closely with social, energy, and EU-level initiatives to maximize impact while containing fiscal costs.

### Housing mobilization and affordability measures (authorities’ measures)
- Authorities resolved to scale up social housing and extend measures to bring idle housing stock into use.
- Forthcoming measures expected to increase supply:
  - Inheritance law amendment and the tenant registry to address fragmented homeownership.
  - New housing strategy to map affordability challenges across regions and household categories.
- Staff recommendations:
  - Scale up means-tested renovation programs.
  - Introduce surtaxes on vacant properties, especially in high-pressure regions.
  - Reduce risk premia for LTRs through greater contractual flexibility, reduced dispute resolution times, and rental guarantee schemes.
  - Systematically review and recalibrate demand‑side measures to limit price capitalization and improve targeting.

### External position, NIIP, and CA diagnostics
- External position:
  - CA deficit was 5.7 percent of GDP in 2025.
  - NIIP improved to -137 percent of GDP in 2025, from -138 percent in 2024.
  - NIIP-to-GDP ratio projected to improve gradually with nominal GDP growth and narrowing CA deficit.
- 2025 (% GDP) snapshot: NIIP: -137; Gross Assets: 154; Debt Assets: 119; Gross Liab.: 291; Debt Liab.: 238.
- CA model diagnostics (EBA model, 2025):
  - CA: -5.7 (%GDP)
  - Cycl. Adj. CA: -5.0 (%GDP)
  - Cycl. Adj. CA Norm: -3.3 (%GDP)
  - CA Gap: -1.7 (%GDP) with a standard error of 0.9 percent
  - Identified Policy Gap: 2.5 (%GDP)
  - Unexplained Residual: -4.2 (%GDP)
- REER and competitiveness:
  - ULC-based REER depreciated by 10 percent between 2019 and 2025; post-debt-crisis adjustment was -24 percent between 2011 and 2019.
  - REER model results vary (e.g., CA-implied REER gap: 4.7 percent overvaluation; EBA REER index regression: 0.9 percent gap; EBA REER level regression: 26.8 percent gap), with large unexplained residuals; staff places greater weight on the EBA CA model.

### DSA and sovereign risk assessment (Annex II)
- Overall risk assessment: Moderate.
- Key mitigating factors: large cash buffer, proactive debt management, favorable public debt structure (high share of official debt at low fixed rates, ultra-long maturity), and ECB’s TPI.
- Baseline public debt path (Percent of GDP):
  - Public debt: 155.4 (2024), 146.6 (2025), 136.6 (2026), 130.1 (2027), 125.1 (2028), 120.4 (2029), 115.6 (2030), 111.2 (2031), 107.7 (2032), 104.2 (2033), 100.9 (2034)
  - Real GDP growth (percent, memo): 2.1 (2024), 2.1 (2025), 1.8 (2026), 1.7 (2027), 1.6 (2028–2034)
  - Inflation (GDP deflator; percent, memo): 3.2 (2024), 2.8 (2025), 3.2 (2026), 2.7 (2027), 1.8 (2028–2029), 2.1 (2030–2034)
  - Effective interest rate (percent, memo): 1.9 (2024), 2.0 (2025), 2.1 (2026), rising gradually to 2.8 (2034)
- Gross financing needs (GFN) and debt service: reported detail across 2024–2034 with GFN and debt service figures preserved as presented.
- Long-term stress tests indicate debt-to-GDP continues to decline under several stress scenarios though with large uncertainty.

### Key risk matrix highlights and policy responses
- Global conjunctural risks: Geopolitical tensions, protectionism, and commodity price volatility (High likelihood; Medium impact). Policy responses include allowing automatic stabilizers, targeted support to vulnerable groups, structural reforms, and strengthening financial resilience.
- Global structural risks: Cyberthreats (High) and Climate change (Medium). Responses include strengthening governance, investing in cyber mitigation, accelerating green reforms and energy security.
- Domestic risks: Weak implementation of NGEU projects (Medium) and Overheating (Medium). Responses include enhancing government capacity, digitalization, streamlining procedures, and tightening fiscal/macroprudential policies if needed.

### Implementation status of 2025 Article IV recommendations (selected)
- Fiscal prudence and primary surplus target: Implemented (Primary surplus in 2025 was 4.9 percent of GDP).
- Public investment and social spending efficiency: Implementation in progress.
- Revenue-enhancing reforms and tax-expenditure phase-out: Implementation in progress.
- Credit risk monitoring and macroprudential recalibration: Partly implemented (BoG increased CCyB by 25 bps).
- Labor force participation and regulatory reforms: Implementation in progress.

### Data adequacy and statistical issues (Annex V)
- Overall assessment: Data provision is adequate for surveillance.
- Specific improvements suggested:
  - Reduce discrepancies between production- and expenditure-side quarterly GDP.
  - Publish decomposition of public and private investment in quarterly GDP releases.
  - Consider publishing flash GDP estimates and align timing of inflation data release with euro area peers.
  - Improve capture of informal economy and publish NGEU-funded investment execution data.

*Source: IMF staff report chapter “1. Growth—Robust Expansion.”*

### 1.    Growth—Robust Expansion ___________________________________________________________________ 25

### 1.    Growth—Robust Expansion

### Context: glass half full
- Per capita GDP has risen by 26 percent cumulatively since 2020, reaching 92 percent of the pre-Global Financial Crisis (GFC) level.
- VAT compliance gap declined to about 9 percent in 2024, down from 24 percent in 2019.
- Primary surplus surged to close to 5 percent of GDP in 2024-25 (highest in the EU).
- Public debt-to-GDP decreased by about 65 percentage points since the peak in 2020.
- FSAP (2026) finds systemic risks in the financial sector were low prior to the war and remain manageable.
- Persistent gaps:
  - Per capita income remains more than 15 percent below the pre-crisis trend.
  - Low overall investment, rapid population aging with low labor force participation (LFP), and sluggish productivity growth.
  - Household and corporate balance sheets remain weak; sizable share of households faces low disposable income and limited emergency savings, aggravated by high housing cost burden.

### Recent developments: robust performance with NGEU support
- Real GDP grew by 2.1 percent in 2025, supported by accelerated implementation of NGEU-funded investment projects and record tourism.
- Unemployment rate declined to 8.3 percent in 2025Q4.
- Labor force participation rate rose to 77 percent but remains among the lowest in EU countries, particularly for women and youth.
- Inflation:
  - Annual inflation of 2.9 percent in 2025.
  - Headline inflation rose to 4.6 percent (y/y) in April 2026 as higher global energy prices affected domestic prices.
- Current account:
  - CA deficit narrowed to 5.7 percent of GDP in 2025, down from 7.2 percent in 2024.
  - External position in 2025 assessed as moderately weaker than consistent with medium-term fundamentals and desirable policies (Annex I).
- Fiscal:
  - Primary surplus remained high at 4.9 percent of GDP in 2025.
  - Early repayment of GLF loans to euro area countries (€5.3 billion, 2.1 percent of GDP) helped reduce debt.
  - Debt-to-GDP fell by about 9 percentage points in 2025 to 146.6 percent, down from 210 percent in 2020.
- Credit and banking:
  - Excluding write-offs and valuation effects, credit to the private sector grew by 7.7 percent (y/y) in March 2026.
  - Household credit growth accelerated to 2.8 percent (y/y) in March 2026.
  - Mortgage growth turned positive for first time since GFC; new flows remain relatively low.
  - Credit gap estimated still slightly negative but closing.
  - NPL ratio in significant institutions fell to 2½ percent in 2025Q4.
  - System-wide CET1 ratio around 15½ percent.
- Housing:
  - House prices rose by 7¾ percent in 2025; cumulative increase since 2016 exceeds 85 percent.
  - House prices appear moderately overvalued by about 10 percent.
  - Rent prices rose by 10 percent in 2025.
- Structural reforms and energy:
  - National cadaster nearing completion; full operationalization expected in early 2027.
  - Judicial reforms halved time to decisions in civil cases.
  - Labor market reforms include codification of labor legislation and fast-track hiring procedures.
  - Renewable electricity production expanded; wholesale electricity prices fell to below the median in recent months.
  - Strategic partnership signed to position Greece as regional LNG hub and support prospective offshore natural gas exploration in the Ionian Sea.

### Outlook: moderating momentum amid global headwinds and structural drag
- Growth projections:
  - 2026: growth projected to soften to 1.8 percent (0.3 percentage points lower than anticipated prior to the war).
  - 2027: growth projected at 1.7 percent despite expiration of NGEU funding and a contractionary fiscal stance.
  - Medium term: growth projected to slightly moderate to 1.6 percent.
  - Investment-to-GDP ratio expected to remain below euro area average but rise by ½ percentage points.
- Inflation projections:
  - Headline inflation projected to rise to 3.5 percent on average in 2026—0.9 percentage points higher than pre-war projection.
  - Peak around 5 percent (y/y) in the second half of 2026, then disinflation expected as output gap narrows and nominal wage growth slows.
- External sector:
  - CA deficit expected to widen near term due to higher energy imports, then gradually narrow to around 4 percent of GDP in the medium term.
- Risk assessment:
  - Downside growth risks: protracted Middle East war, escalation of geopolitical tensions, trade fragmentation, delays in NGEU project execution, delayed structural reforms, adverse climate shocks.
  - Upside growth risks: stronger effects of fiscal package and reforms, stronger-than-expected euro area recovery.
  - Inflation risks skewed to the upside: higher global commodity prices, wage growth outpacing productivity, costs from climate shocks.
- Severe scenario (April 2026 WEO severe scenario):
  - Growth projected to slow to about 1¼ percent in 2026 before reverting to baseline.
  - Annual inflation will reach 5 percent in 2026 and stay persistent.

### Balance sheet vulnerabilities and distributional concerns
- Households:
  - Liquid assets (in percent of GDP) have declined amid steady deleveraging.
  - Two-thirds of households declare less than three months of emergency savings.
  - High housing cost burden; prevalence of variable-rate mortgages increases exposure to income and interest rate shocks.
- Corporates:
  - Balance sheet repair progressed unevenly; corporate resilience improved but a sizable tail of weaker firms persists.
  - Around 20 percent of corporate debt is held by firms with interest coverage ratio below one.
  - A drop in profitability in geopolitically-sensitive sectors, or rises in interest rates/risk premia, could stress illiquid firms and delay SME crisis debt resolution.

### Authorities’ views
- Authorities consider Greece well positioned to withstand shocks due to strengthened public finances and financial stability.
- Fiscal policy focus: supporting household purchasing power (e.g., reduction in labor tax wedge) and promoting medium-term growth.
- Authorities confident inflation will converge toward the ECB euro area target of 2 percent by mid-2027.
- Authorities expect no fiscal cliff in 2027 as public investment continues to be supported by structural EU funds and ongoing NGEU loan‑financed private investment.

### Policy discussion: toward balanced and sustainable growth — fiscal policy
- Objectives: balance advancing debt reduction and supporting growth, with energy price relief measures providing temporary, targeted support to vulnerable groups.
- New fiscal package (effective January 2026):
  - Focus on broad-based personal income tax (PIT) rate cuts.
  - Additional rate cuts for low- and middle-income families with children and young workers.
  - Estimated fiscal cost €1.76 billion (0.7 percent of GDP) in 2026.
  - Includes pension enhancements, public sector wage measures, and housing measures (tax relief on rental income, VAT and tax incentives for new construction, property tax reductions in small municipalities, incentives to bring vacant properties into rental market).
  - Staff: growth support welcome but monitor inflation; moderate fiscal expansion if inflation deviates significantly from baseline (e.g., preserve larger-than-expected revenue).
- Fuel and energy support package:
  - Means-tested Fuel Pass (lump-sum subsidy) without price changes in gas stations until May.
  - Diesel subsidy at the pump (€0.2 per liter including VAT) until May.
  - 15 percent fertilizer subsidy until August.
  - Regulatory cap on profit margins for fuel (€0.12 per liter) and selected essential goods (at 2025 levels).
  - Emergency support for families with children; raising income ceiling for pensioners to receive financial aid.
  - Estimated cost about 0.3 percent of GDP, partly offset by higher online gaming tax revenue.
  - Staff: package is limited and targeted; caution that price subsidies should not blunt necessary demand response; any extension should strengthen targeting.
- Fiscal baseline and trajectory:
  - Primary surplus projected at 3.6 percent of GDP in 2026 (down from 4.9 percent in 2025).
  - Revenue losses from fiscal package partly offset by continued gains in revenue compliance and non-indexation of PIT.
  - Public investment to rise by around ½ percentage point of GDP, largely financed by higher NGEU grants in short term and structural EU funds medium term.
  - Medium-term primary surplus projected to remain robust at around 2¾ percent of GDP despite further planned social security contribution reduction of 0.5 percentage point in 2027 and impact of fiscal package.
  - Authorities plan to fully repay GLF loans by 2031—10 years ahead of schedule—using part of the sizable cash buffer.
  - Public debt-to-GDP ratio projected to fall by more than 30 percentage points to about 110 percent by 2031, a cumulative decline of nearly 100 percentage points from its peak in 2020.

*Source: IMF staff report chapter “1. Growth—Robust Expansion.”*

### 17.      Under the severe scenario of more significant energy price shocks, the temporary and

### 1grcea2026001 - 17.      Under the severe scenario of more significant energy price shocks, the temporary and

### Energy shocks and fiscal stance
- Automatic stabilizers should be the primary policy response to larger energy price shocks, using the fiscal buffer from the stronger-than-expected primary balance in 2025.
- Temporary and well-targeted energy support could be extended or expanded within the prudent medium-term fiscal framework while managing additional inflationary pressures.
- Authorities could extend or expand well-targeted support for those most affected—including through the means-tested Guaranteed Minimum Income (GMI) scheme—while preserving energy price signals.
- The path of the medium-term primary balance should be kept unchanged to:
  - preserve debt sustainability;
  - contain risks of adding to possible excess demand, widening of the current account deficit, inflationary pressures, or un-anchoring inflation expectations and wage growth beyond productivity growth, which could erode competitiveness.

### Investment and EU funds absorption
- By end-2025, NGEU grant disbursement reached 66 percent of the committed amounts.
- Absorption of other structural EU funds under the National Strategic Reference Framework for 2021-27 stood at about 20 percent.
- Greece faces an investment gap relative to the euro area of around 4 percentage points of GDP, especially in construction and intellectual property products (including R&D, software, and database).
- Recommendations:
  - Fully utilize available EU funds beyond NGEU to maintain public investment and catalyze private investment for capital deepening.
  - Address fragmented legal framework and streamline secondary legislation on public investment to accelerate implementation.

### Pensions and social spending
- Long-term pension spending projected to decline by about 2.5 percentage points of GDP between 2022 and 2070 due to reforms since 2010 (unification of schemes, pension indexation, linking retirement age with life expectancy).
- Any future pension increase should follow the established indexation formula to preserve long-term sustainability; excessive increases in public-sector wages should be avoided.
- Key social performance gaps:
  - PISA scores have declined and are now below OECD averages in mathematics, science and reading.
  - The share of population reporting unmet needs for medical care is highest in the EU.
  - Housing affordability challenges remain acute, particularly for younger and low‑income households.
- Non-pension social protection spending remains well below EU averages and has only limited impact on reducing inequality.
- Recommendations:
  - Advance the one-stop portal for social benefits linked to employment registration.
  - Ensure transparent, targeted, and streamlined subsidy distribution.
  - Strengthen the means-tested GMI scheme by expanding coverage, improving targeting, and reinforcing job integration to raise labor force participation.

### Fiscal structural reforms
- Phasing out inefficient and regressive tax expenditures is recommended; Greece’s tax-expenditure envelope remains large by EU standards with measures (e.g., reduced VAT rates and exemptions) that are regressive.
- Establish a systematic, multi-year framework for evaluating tax expenditures to identify regressive or ineffective provisions for phasing out.
- Future tax-reduction measures should be guided by dedicated impact assessments.
- Strengthen public procurement: streamline and centralize procedures, strengthen oversight, expand e-procurement to address low tender participation and slow processing (Greece records the lowest tender-response times in the EU).
- Regularly adjust PIT parameters to avoid bracket creep by establishing a transparent, rules‑based mechanism (e.g., indexing brackets, credits, thresholds to inflation or wage growth) while preserving progressivity and targeting relief to low- and middle‑income households, particularly families with children.

### Authorities’ views on fiscal chapter
- Authorities agreed fiscal policy should remain prudent and forward-looking to strengthen public and private sector balance sheets, safeguard public investment, and protect critical social spending.
- Additional fiscal space from combatting tax evasion could help provide temporary and targeted support to vulnerable households and firms while sustaining robust public investment after expiration of NGEU funding.
- Authorities agreed on improving coverage, targeting, and effectiveness of social protection (including one-stop portal) and continuing unemployment benefit reforms and public procurement strengthening.

### Financial sector: overall assessment and risks
- Financial stability risks were low prior to the war in the Middle East and remain manageable, but continued vigilance is warranted.
- Credit and real estate dynamics show no signs of excessive overheating; credit standards remained stable overall.
- FSAP stress tests confirm banks are well-equipped to weather shocks under adverse scenarios.
- Concentration and legacy exposures:
  - The ten largest common NFCs account for 81 percent of aggregate Tier 1 capital, net of credit risk mitigation.
  - Distressed debt of about 30 percent of GDP is still under recovery by credit servicers.
  - Deferred Tax Credits (DTCs) represent 44.5 percent of CET1 in 2025Q2, undermining quality of bank capital.
- Sovereign-bank nexus is moderate on direct exposures but heightened by contingent liabilities, including DTCs and government guarantees on HAPS senior tranches.

### Macroprudential policy and BoG actions
- Interagency coordination should be formalized by operationalizing the Systemic Stability Council (SSC) with dedicated subcommittees.
- Central credit register (recently created) will help develop in-house macroprudential stress testing and policy refinement.
- Capital-based measures:
  - The BoG increased the countercyclical capital buffer (CCyB) by 25 bps to its positive neutral (PN) CCyB level (0.5 percent), effective October 2026.
  - CCyB should be tightened further if risks accumulate and released if financial conditions tighten sharply.
  - BoG should strengthen quantitative foundations for calibrating the PN CCyB.
- Borrower-based measures (BBMs), effective January 2025, have not materially constrained new mortgage lending so far due to scope exclusions and a 10 percent flexibility limit.
  - BoG should monitor credit risk using the central credit registry and be ready to refine BBMs if housing-credit pressure intensifies.

### Credit servicers, insolvency, and bank capital quality
- Strengthen BoG oversight of credit servicers via requirements for updated business plans, annual performance reports, governance assessment, and capacity to handle large NPL volumes.
- Authorities should produce an annual report, certified by the national public auditor, on the evolution of HAPS and valuation of fiscal exposure and introduce a website with regularly updated data.
- Implementation of the 2021 insolvency reform should be strengthened through greater judicial specialization, adequate court resourcing, and production of meaningful statistics.
- Remaining impediments to efficient mortgage enforcement should be addressed; introduce a formal reorganization process for large complex corporate distress cases.
- Four SIs adopted a voluntary accelerated prudential amortization scheme of DTCs in proportion to annual dividend payout projecting full amortization by 2031-33 (as opposed to 2041 with the legal amortization calendar).
  - Codifying an accelerated amortization in Greek law would help address the sovereign-bank nexus across all banks.
- Transition to digital finance introduces cyber and operational risks requiring enhanced cross-agency oversight and supervisory resources.

### Financial safety net and AML/CFT
- Reinforce ELA framework through a formal BoG authorization process, pre-positioning of collateral by banks, and internal ELA-in-resolution policies.
- Strengthen deposit insurance by revising target funding levels to allow coverage of concurrent failure of the 2-4 largest smaller banks and establishing a public backstop.
- AML/CFT:
  - BoG should ensure all banks and payment institutions are subject to in‑field testing at a frequency commensurate with their risk profiles.
  - Progress needed to digitalize the Register of Shipping Companies and improve risk-based AML/CFT supervision of real estate agents, accountants-tax advisors, lawyers, and notaries.

### Authorities’ views on financial sector
- Authorities broadly agreed with the systemic risk assessment and FSAP recommendations, considering the banking system well positioned to absorb potential losses under adverse scenarios.
- Committed to addressing crisis legacy issues by streamlining insolvency framework, strengthening supervision of credit servicers, and promoting efficient workouts.
- Consider current macroprudential stance appropriate while monitoring conditions and considering additional buffers if risks increase; cautioned ELA pre-positioning may be overly burdensome.

### Housing policy: diagnosis and recommended actions
- Structural challenge: high housing cost burden despite outright ownership of more than 60 percent, due to aging, energy-inefficient stock and underinvestment in renovation since the GFC.
- About 35 percent of the housing stock is not used as primary residence; many vacant properties have been out of the market due to homeowner liquidity constraints, high renovation costs, fragmented homeownership, and building compliance issues.
- Demand-supply mismatches driven by size, quality, and location imbalances and pressures from short-term rentals and demographic shifts.
- Policy recommendations:
  - Use existing housing supply more efficiently and adopt better-targeted, well-calibrated measures to improve affordability.
  - Target demand-side measures (e.g., rent refund scheme) to vulnerable groups with clear sunset and evaluation features; consider phasing out the VAT exemption on new construction.
  - To reduce speculative demand and support long-term rental (LTR) supply:
    - Assess effectiveness of increased Golden Visa investment thresholds, tightened STR regulation, and tax incentives for LTR.
    - Continue addressing information asymmetry via Property Ownership and Management Registry (MIDA).
    - Revise down minimum lease durations, reduce delays in late-payment dispute resolution, and introduce rental payment guarantee schemes for vulnerable tenants.
  - Shift toward durable supply measures in the planned housing strategy:
    - Mobilize existing units via expansion and better targeting of renovation programs, including energy efficiency upgrades.
    - Combine with targeted disincentives for prolonged vacancy (e.g., vacancy surtaxes) and actions to reduce hurdles to housing mobility (inheritance law changes, expedited regularization).
    - Develop more ambitious social rental housing programs combined with budget-neutral incentives for developers of affordable units in high-pressure areas.
  - Coordinate closely with social, energy, and EU-level initiatives to maximize impact while containing fiscal costs.

*Source: IMF staff summary of chapter content.*

### 32.      The authorities agreed that policy should prioritize mobilizing underutilized housing

### 32.      The authorities agreed that policy should prioritize mobilizing underutilized housing stock to improve housing affordability

### Housing policy: mobilizing underutilized stock and affordability measures
- Authorities resolved to scale up social housing and extend measures to bring idle housing stock into use.
- Forthcoming measures expected to increase supply:
  - Inheritance law amendment and the tenant registry to address fragmented homeownership and reduce risks associated with long-term rentals.
  - New housing strategy to map housing affordability challenges across regions and household categories to inform future measures.
- Short-term rental restrictions will be monitored and adjusted as needed.
- Staff recommendations to mobilize supply and improve affordability:
  - Scale up means-tested renovation programs.
  - Introduce surtaxes on vacant properties, especially in high-pressure regions.
  - Reduce risk premia for long-term rentals through:
    - Greater contractual flexibility.
    - Reduced time for dispute resolution.
    - Rental guarantee schemes.
  - Systematically review and recalibrate demand‑side measures to limit price capitalization and improve targeting.

### Prevailing structural weaknesses weighing on supply and growth
- Large structural gaps relative to European peers remain in productivity, LFP, and investment.
- Working age population is projected to decline by about 1 percent annually.
- Domestic supply capacity is constrained as firms’ growth—particularly among young and productive ones—is hindered by structural impediments.
- Non-wage cost pressures persist, including regulatory and administrative burdens and still-high energy costs, exacerbated by sluggish productivity growth.

### Fostering digital transformation in the private sector
- Greece’s IT capital stock—particularly software and databases—lags behind euro area peers.
- Estimated productivity gains from AI are modest at around 0.8 percent over five years, limited in part by relatively high capital costs.
- Policy priorities to strengthen adoption of digital technologies and AI:
  - Leverage the national AI strategy to provide shared infrastructure (for example, the AI Factory’s low-cost and high-performance computing resources).
  - Expand financing options for innovative firms, including through venture capital and development banks.
  - Implement complementary policies to promote technology diffusion across firms.

### Reducing regulatory and administrative burdens
- Perceived regulatory and administrative burdens remain elevated, raising direct production costs and uncertainty for firms.
- Key reform priorities:
  - Upgrade spatial planning and licensing frameworks.
  - Simplify entry and exit procedures.
  - Modernize trade procedures through digitalization.
- Expected impact: boost firms’ growth and productivity, promote business dynamics and competition, with significant effects on young firms.

### Raising labor force participation (LFP) and improving workforce skills
- Recent measures to reduce the high tax wedge, particularly for low- and middle-income families with children and young workers, are welcome to increase work incentives and reduce informality.
- Policy options to raise LFP and skills:
  - Channel tax allowances or childcare support through the means-tested GMI for efficient targeting.
  - Reform unemployment benefit phasing out to incentivize job search.
  - Expand active labor market programs and reskilling initiatives.
  - Scale up lifelong learning, especially in high-demand sectors such as science, technology, and healthcare.
  - Facilitate reallocation of labor to productive firms and provide specialized training to help expand housing supply without pressuring construction costs.
  - Improve coordination across education systems, including primary and tertiary education aligned with evolving needs.

### Completing the EU single market to reinforce reforms
- Deepening the EU single market across four dimensions would particularly benefit Greece:
  - Enforce existing rules and adopt common corporate and insolvency frameworks to set a level playing field and help firms scale beyond small national markets.
  - Complete the Savings and Investments Union to lower financing costs and crowd in risk capital for innovators.
  - Improve labor mobility through automatic or expanded mutual recognition for key professionals, digital social-security portability, and streamlined relocation procedures.
  - Integrate the energy market by accelerating interconnectors and aligning grid access and tariffs to achieve energy security with lower energy price and volatility.
- Expected gains: improve business environment and lower households’ burden on housing costs.

### Authorities’ views
- Authorities concurred with staff on priority areas and highlighted recent reform progress (judicial reforms, national cadastre, central credit registry) to safeguard financial stability and promote productivity.
- Authorities remain committed to advancing structural reforms to reduce regulatory burdens, support labor market participation, and diversify the economy toward high value-added sectors.
- They noted that persistent CA deficit partly reflects remaining supply-side impediments and that recent strong increases in FDI inflows reflect continued improvements in the investment environment.

### Staff appraisal: macro outlook, risks, and policy priorities
- Growth outlook:
  - Growth is expected to moderate due to elevated energy prices and weaker external demand amid the war in the Middle East.
  - Declining working age population, low LFP, and sluggish productivity weigh on medium-term growth prospects.
- Risks:
  - Risks to the growth outlook are tilted to the downside; risks to inflation are tilted upside.
  - Potential headwinds: protracted war in the Middle East, escalation of geopolitical tensions, trade fragmentation, financial market disruptions, further increases in global commodity prices, and wage growth outpacing productivity.
- Fiscal policy:
  - Continued growth-friendly fiscal prudence recommended to balance debt reduction and support growth.
  - Any energy shock support should be well targeted, temporary, preserve energy price signals, and avoid adding to excess demand and inflationary pressures.
  - Fully utilize available EU funds to sustain public investment while safeguarding critical social spending.
  - Advance fiscal structural reforms to enhance effectiveness and create fiscal space for private sector balance sheet repair.
- Financial stability:
  - Risks manageable but cyclical vulnerabilities warrant vigilance.
  - CCyB should be tightened if systemic risks rise and released if financial conditions deteriorate sharply.
  - Consider additional buffers for large corporate exposure overlaps.
  - BoG should be ready to refine BBMs to ensure prudent lending standards if housing and credit pressure intensifies.
- Overall structural recommendation:
  - Ambitious structural reforms—reducing regulatory and administrative burdens, raising LFP, improving skills, fostering digital transformation, and completing the EU single market—would sustainably support growth, reduce the persistent CA deficit, and improve resilience.
- Procedural note:
  - It is recommended that the next Article IV consultation take place on the standard 12–month cycle.

*GREECE  INTERNATIONAL MONETARY FUND*

### 18.7 percent

### 18.7 percent

### Key findings and projections
- External position in 2025 is assessed to be moderately weaker than the level implied by fundamentals and desirable policies based on preliminary data.
- The current account (CA) deficit was 5.7 percent of GDP in 2025.
- The CA deficit is projected to widen in the near term due to higher energy prices, and gradually narrow to about 4 percent over the medium term.
- Net international investment position (NIIP) improved to -137 percent of GDP in 2025, from -138 percent in 2024.
- NIIP-to-GDP ratio is projected to improve gradually, supported by sustained nominal GDP growth and narrowing CA deficit.

### Foreign assets and liabilities
- 2025 (% GDP) snapshot: NIIP: -137; Gross Assets: 154; Debt Assets: 119; Gross Liab.: 291; Debt Liab.: 238.
- Improvement in NIIP reflects strong nominal GDP growth, valuation effects, and non-debt-creating flows, including transfers from the EU.
- Risks mitigated by liability structure:
  - Around three quarters of external debt is held by the official sectors, primarily reflecting general government (GG) and central bank’s TARGET liabilities.
  - Most liabilities are euro-denominated.
  - Bulk of GG external debt carries fixed, low interest rates and ultra-long maturity.
- Prudent fiscal policies and active liabilities management are expected to reduce GG’s external debt; private demand for Greek sovereign bonds will remain ample thanks to regained investment grade.

### Current account assessment
- Background: CA deficit narrowed to 5.7 percent of GDP in 2025, down from 7.2 percent of GDP in 2024, reflecting terms-of-trade gains from lower global fuel prices and reduced interest payments on external liabilities amid lower global interest rates.
- Near-term projection: CA projected to widen due to higher energy prices; medium-term path: gradually narrow to about 4 percent of GDP as domestic demand moderates and export base expands.
- EBA model diagnostics (2025):
  - CA: -5.7 (%GDP)
  - Cycl. Adj. CA: -5.0 (%GDP)
  - Cycl. Adj. CA Norm: -3.3 (%GDP)
  - CA Gap: -1.7 (%GDP) with a standard error of 0.9 percent
  - Identified Policy Gap: 2.5 (%GDP)
  - Unexplained Residual: -4.2 (%GDP)
- Interpretation: Positive policy gap (2.5 percent) from tighter fiscal and credit conditions is more than offset by a sizable unexplained residual (-4.2 percent), likely reflecting structural impediments to competitiveness and low private sector savings not fully captured by the EBA model.

### Real exchange rate and competitiveness
- ULC-based REER depreciated by 10 percent between 2019 and 2025, reflecting slower wage growth and stronger labor productivity gains than in trading partners.
- Post-debt-crisis adjustment: -24 percent between 2011 and 2019.
- Euro area REER change: +2 percent over 2019–2025.
- CPI-based REER shows similar pattern but with more moderate depreciation due to persistent non-wage cost pressures, including regulatory and administrative burdens and energy costs.
- REER model results:
  - CA-implied REER gap: 4.7 percent overvaluation (based on semi-elasticity of 0.37).
  - EBA REER index regression: REER gap of 0.9 percent in 2025.
  - EBA REER level regression: REER gap of 26.8 percent in 2025.
- Assessment: EBA REER models have large unexplained residuals and sizable standard errors; staff places greater weight on the EBA CA model in forming the overall external sector assessment.

### Capital and financial accounts: flows and risks
- 2025 financing mix for CA deficit: mostly FDI flows (2.7 percent of GDP) and portfolio investment (4.9 percent of GDP), alongside capital transfers (0.7 percent of GDP).
- Medium-term expectations:
  - FDI inflows expected to sustain as non-privatization-related investment more than offsets normalization of privatization program.
  - Portfolio inflows dominated by government bonds; equity and bond inflows to the private sector expected to rise gradually.
  - Capital account inflows (primarily EU fund disbursements) projected to persist, supported by EU structural funds, moderating after NGEU expiration.
- Rollover risks: Mitigated by high share of official loans with low rates and ultra-long maturities, and government’s sizable cash buffer.
- Continued supply-side reforms would strengthen competitiveness and support sustained FDI and other capital inflows.

### Potential policy responses (recommended)
- Continued fiscal prudence to maintain a primary surplus, supporting further public debt reduction and improvement in the large negative NIIP.
- Structural reforms to raise domestic supply potential and export competitiveness, including:
  - Measures to reduce regulatory and administrative barriers.
  - Foster digital transformation in the private sector.
  - Raise labor force participation, which will also support private savings.
- Active liabilities management and prudent fiscal policies to reduce GG external debt and lower rollover risks.

### FX intervention and reserves
- Background: The euro has the status of a global reserve currency.
- Assessment: Reserves held by the euro area are low relative to standard metrics; the currency is free floating.

*Sources: Bank of Greece; and IMF staff estimates.*

### Annex II. Sovereign Risk and Debt Sustainability Assessment

### Annex II. Sovereign Risk and Debt Sustainability Assessment

### Overall risk assessment
- Overall: Moderate. Staff assess the overall risk of sovereign stress as moderate.
- Near term: Not applicable/published in this surveillance-only context (note 1/).
- Medium term: Moderate overall, with mixed mechanical signals:
  - Fan chart module: High (mechanical signal driven by large width and still high debt level).
  - GFN module: Low (driven by strong primary surplus).
  - Mitigating factors cited: large cash buffer, proactive debt management, favorable public debt structure (high share of official debt at low fixed rates, ultra-long maturity, and long grace periods), new EU economic governance framework triggers, and ECB’s Transmission Protection Instruments (TPI).
- Long term: n.a. — public debt-to-GDP ratio projected to continue declining in the long term with manageable GFNs under several stress scenarios, but high uncertainty remains for a definitive long-term sustainability assessment.
- Sustainability assessment: Not required for surveillance countries (note 2/). Debt stabilization in the baseline: Yes.

### Key commentary and interpretation
- Staff commentary: Greece’s overall risks of sovereign stress are assessed to be moderate in the medium term. The public debt-to-GDP ratio is projected to be firmly on a downward trajectory with manageable rollover risks even under several stress scenarios, reflecting the prudent fiscal policy stance, favorable debt structure, and strong institutional arrangements including the EU economic governance framework and the ECB’s TPI. The projection of continued long-run decline is subject to large uncertainty.
- Note on concept: Risk of sovereign stress is broader than debt sustainability; unsustainable debt requires exceptional measures (e.g., debt restructuring), while stress may be remediable through fiscal adjustment or new financing.

### Debt coverage and disclosures
- Debt coverage: General government, follows ESA 2010.
- Debt data include SDR holdings and NGEU loans.

### Public debt structure indicators and commentary
- Currency denomination: Public debt is almost entirely denominated in domestic currency (euro).
- Interest and maturity: High share at low fixed rates and a weighted average maturity of about 19 years.
- Creditor composition: About three quarters of the debt is held by external official creditor.
- Marketable debt outlook: With regained investment grade sovereign rating, share of marketable debt is expected to increase gradually.
- Effective interest rate outlook: Expected to remain subdued due to large share of low-interest-bearing non-marketable debt.

### Baseline scenario projections (Percent of GDP unless indicated otherwise)
- Public debt path (Actual 2024 and projections 2024–2034):
  - Public debt: 155.4 (2024), 146.6 (2025), 136.6 (2026), 130.1 (2027), 125.1 (2028), 120.4 (2029), 115.6 (2030), 111.2 (2031), 107.7 (2032), 104.2 (2033), 100.9 (2034)
  - Change in public debt: -10.2 (2024), -8.8 (2025), -9.9 (2026), -6.5 (2027), -5.0 (2028), -4.7 (2029), -4.8 (2030), -4.5 (2031), -3.5 (2032), -3.4 (2033), -3.3 (2034)
  - Contribution of identified flows: -2.3 (2024), -8.8 (2025), -9.9 (2026), -6.5 (2027), -4.2 (2028), -4.4 (2029), -4.8 (2030), -4.5 (2031), -3.5 (2032), -3.4 (2033), -3.3 (2034)
  - Primary deficit: -4.8 (2024), -4.9 (2025), -3.6 (2026), -3.0 (2027), -2.9 (2028), -2.8 (2029), -2.7 (2030), -2.6 (2031), -2.4 (2032), -2.4 (2033), -2.4 (2034)
  - Noninterest revenues: 49.4 (2024), 50.0 (2025), 49.9 (2026), 48.7 (2027), 48.4 (2028), 48.3 (2029), 48.2 (2030), 48.2 (2031), 48.2 (2032), 48.2 (2033), 48.2 (2034)
  - Noninterest expenditures: 44.6 (2024), 45.1 (2025), 46.3 (2026), 45.7 (2027), 45.5 (2028), 45.5 (2029), 45.5 (2030), 45.6 (2031), 45.8 (2032), 45.8 (2033), 45.8 (2034)
  - Automatic debt dynamics: -5.4 (2024), -4.4 (2025), -4.1 (2026), -2.8 (2027), -1.3 (2028), -1.2 (2029), -1.4 (2030), -1.3 (2031), -1.1 (2032), -1.0 (2033), -0.9 (2034)
  - Real interest rate and relative inflation: -2.0 (2024), -1.2 (2025), -1.5 (2026), -0.5 (2027), 0.7 (2028), 0.8 (2029), 0.5 (2030), 0.5 (2031), 0.6 (2032), 0.7 (2033), 0.7 (2034)
  - Real growth rate: -3.4 (2024), -3.2 (2025), -2.6 (2026), -2.2 (2027), -2.0 (2028), -2.0 (2029), -1.9a. (2030), -1.8 (2031), -1.8 (2032), -1.7 (2033), -1.6 (2034)
  - Other identified flows (Other transactions): 8.0 (2024), 0.4 (2025), -2.2 (2026), -0.7 (2027), 0.0 (2028), -0.3 (2029), -0.7 (2030), -0.6 (2031), 0.0 (2032), 0.0 (2033), 0.0 (2034)
  - Contribution of residual: -7.9 (2024), 0.0 (2025), 0.0 (2026), 0.0 (2027), -0.8 (2028), -0.4 (2029), 0.0 (2030), 0.0 (2031), 0.0 (2032), 0.0 (2033), 0.0 (2034)
  - Gross financing needs: 9.5 (2024), 2.2 (2025), 6.2 (2026), 3.6 (2027), 4.9 (2028), 3.0 (2029), 3.0 (2030), 4.9 (2031), 3.9 (2032), 7.4 (2033), 4.8 (2034)
  - Debt service (of which, local currency): 14.3 (2024), 7.1 (2025), 9.8 (2026), 6.6 (2027), 7.8 (2028), 5.8 (2029), 5.8 (2030), 5.7 (2031), 7.4 (2032), 6.2 (2033), 9.8 (2034), 7.2 (note: listed as a single sequence; maintain exact entries as presented)
- Memo projections:
  - Real GDP growth (percent): 2.1 (2024), 2.1 (2025), 1.8 (2026), 1.7 (2027), 1.6 (2028), 1.6 (2029), 1.6 (2030), 1.6 (2031), 1.6 (2032), 1.6 (2033), 1.6 (2034)
  - Inflation (GDP deflator; percent): 3.2 (2024), 2.8 (2025), 3.2 (2026), 2.7 (2027), 1.8 (2028), 1.8 (2029), 2.1 (2030), 2.1 (2031), 2.1 (2032), 2.1 (2033), 2.1 (2034)
  - Nominal GDP growth (percent): 5.4 (2024), 4.9 (2025), 5.0 (2026), 4.4 (2027), 4.0 (2028), 3.7 (2029), 3.7 (2030), 3.7 (2031), 3.7 (2032), 3.7 (2033), 3.7 (2034)
  - Effective interest rate (percent): 1.9 (2024), 2.0 (2025), 2.1 (2026), 2.3 (2027), 2.4 (2028), 2.4 (2029), 2.5 (2030), 2.6 (2031), 2.7 (2032), 2.7 (2033), 2.8 (2034)

### Medium-term risk assessment and realism of assumptions
- Fan chart module: Mechanically indicates High risk due to large width and historically driven still-high debt level.
- GFN module: Suggests Low risk driven by high primary surplus and robust growth.
- Overall medium-term risk combining DFI and GFN: Moderate, supported by mitigating factors (cash buffer, debt management, debt structure).
- Forecast track record commentary: Forecasts show some optimistic bias for public debt-to-GDP ratio and interest-growth differential, pessimistic bias for output gap in cross-country comparison. Projected debt reduction is larger than peers but smaller than Greece’s own maximum historical record. Projected fiscal adjustment is left of the distribution compared to peers and well below the maximum historical record.

### Stress tests, triggered modules, and long-term projections
- Triggered modules: Large amortizations, Pensions, Health, Climate Change: Adaptation and Mitigation, Natural Resources.
- Long-term stress-test commentary:
  - Stress tests suggest public debt-to-GDP ratio would continue to decline in the long run even when including costs associated with pension, health spending, and climate change mitigation.
  - European Commission’s 2024 Ageing Report projections: pension spending (share of GDP) would decline in the long term after peaking in the next decade due to recent pension reforms including a new contributory pension pillar; health spending would increase in the long run but only at a moderate pace.
  - Climate change mitigation would incur additional fiscal cost, slowing debt reduction.
  - Overall, stress tests with higher fiscal costs for demographic and climate mitigation needs suggest a declining public debt path with manageable fiscal risks in the long run, but subject to large uncertainty.
- Long-term risk table excerpt (variables and values):
  - Variable 2030 / 2034 to 2038 average / Custom Scenario:
    - Real GDP growth: 1.6% / 1.6% / 0.8%
    - Primary Balance-to-GDP ratio: 2.7% / 2.3% / 1.5%
    - Real depreciation: -2.0% / -2.1% / -2.0%
    - Inflation (GDP deflator): 2.1% / 2.1% / 2.1%
  - Projection variants noted: Baseline with t+5; Baseline with t+5 and DSPB; Historical 10-year average; Custom.

### DSA supplementary information and contingent liabilities
- Public guarantees: On a declining path since 2022; financial sector guarantees were provided to help address legacy non-performing loans. Authorities’ accounting and treatment of public guarantees comply with Eurostat methodologies.
- Public pension and health spending (percent of GDP): Projected to decrease in the long run due to recent pension reforms. Pension spending evolving from significantly higher than median for EU countries to the median level in 2070. Health spending will remain below the median level.

### Risk Assessment Matrix — Key risks, impacts, and policy responses (selected)
- Global conjunctural risks:
  - Geopolitical Tensions and Intensification of Conflicts (High likelihood). Impact: Medium (negative effects on tourism, shipping, goods exports; higher energy and food prices; higher interest rates; burden on low and middle-income households; increased refugees). Policy responses:
    - Allow automatic stabilizers to fully operate.
    - Provide temporary and targeted support to the most vulnerable, avoid broad-based discretionary support unless shocks amplify.
    - Augment Active Labor Market Programs (ALMPs) to facilitate refugees’ labor market transitions.
    - Strengthen financial sector resilience, conservative provisioning, increase releasable buffers while maintaining underwriting standards.
  - Protectionism, Trade Disruptions, and Policy Uncertainty (High). Impact: Medium. Policy responses:
    - Allow automatic stabilizers to fully operate.
    - Accelerate supply-side structural reforms to enhance competitiveness and productivity.
    - Promote international cooperation via active participation in policy coordination in the euro area and beyond.
  - Commodity Price Volatility (High). Impact: Medium. Policy responses:
    - Provide temporary and targeted support to the most vulnerable, avoid broad-based discretionary support unless shock amplifies.
    - Continue to expand renewable energy production and scale up power networks.
    - Scale-up renovation programs and incentives to increase household energy efficiency.
- Global structural risks:
  - Cyberthreats (High). Impact: Medium. Policy responses:
    - Assess vulnerabilities and address damage.
    - Strengthen governance and risk management in public and private organizations; scale up investment in cyber risk mitigation.
    - Dedicate more specialized resources to monitor cyber risks at the Bank of Greece (BoG).
  - Climate Change (Medium). Impact: Medium. Policy responses:
    - Accelerate reforms and investment for greener growth and energy security.
    - Expeditious implementation of climate policies, improve energy mix, scale up electricity networks and storage, raise carbon prices.
- Domestic risks:
  - Weak implementation of NGEU projects (Medium). Impact if realized: High. Policy responses:
    - Enhance government capacity, digitalization, streamline procedures.
    - Accelerate labor market reforms to alleviate labor shortages.
  - Overheating (Medium). Impact: Medium. Policy responses:
    - Tighten fiscal and macroprudential policies.
    - Advance structural reforms to reduce supply-side constraints.

### Implementation status of main 2025 Article IV recommendations (Annex IV)
- Fiscal policy and structural fiscal reforms:
  - Recommendation: Continue fiscal prudence with primary surplus of more than 2 percent of GDP; use additional space for debt reduction and crucial social and capital spending.
    - Authorities’ response: Implemented. Primary surplus in 2025 was 4.9 percent of GDP. Debt has been on a firm downward path.
  - Recommendation: Enhance public investment implementation; increase efficiency of social expenditure; contain spending pressure.
    - Authorities’ response: Implementation in progress. Education spending addressing AI integration and vocational training matching labor market needs; delay in one-stop portal for social benefits but progressing; public sector wage increases intended to align with minimum wage.
  - Recommendation: Consider revenue-enhancing reforms to improve tax compliance; broaden tax base by lowering tax-free income threshold; phase out inefficient and regressive tax expenditures; consider raising carbon pricing in non-ETS sectors.
    - Authorities’ response: Implementation in progress. New tax evasion measures implemented. Reduced VAT rates on some products not yet phased out. Tax base not broadened with recent income tax reform.
- Financial sector and macro-financial issues:
  - Recommendation: Ensure close monitoring and robust management of credit risk; scrutinize provisioning, collateral valuations, and loan origination practices.
    - Authorities’ response: Implemented. NPL coverage ratio increased significantly in 2025. BoG conducted targeted inspection of collateral valuation for LSI.
  - Recommendation: Recalibrate BBMs for mortgages and the CCyB; use elevated bank profits to build capital buffers and improve capital quality.
    - Authorities’ response: Partly implemented. BoG increased the CCyB by 25 basis points to its neutral level.
- Other structural reforms:
  - Recommendation: Raise labor force participation (youth and women); reduce training gaps and home care responsibilities; expand targeted labor market policies; reduce tax wedge.
    - Authorities’ response: Implementation in progress. Parental leave provisions expanded (including fathers); multi-year strategic plan for vocational education adopted; 2026 PIT reform includes additional rate cuts for families with children and youth.
  - Recommendation: Accelerate regulatory reforms to foster competition, reduce regulatory burdens in services, improve quality of regulation.
    - Authorities’ response: Implementation in progress. Simplification of customs and business entry/exit processes proceeding; review and upgrading of retail sector regulatory framework planned.
  - Recommendation: Progress judicial system reforms to facilitate resolution of court cases.
    - Authorities’ response: Implementation in progress. Judicial map implementation proceeding; first-instance judicial capacity strengthened and smaller courts consolidated.
  - Recommendation: Advance green transition and energy security (improve power connectivity with distant islands, enhance energy efficiency in industries and transportation, scale up grid networks and storage).
    - Authorities’ response: Implementation in progress. Electricity connectivity with islands enhanced; improving energy efficiency ongoing, including incentives for renovations.

*Source: IMF staff.*

### Annex V. Data Issues

### Annex V. Data Issues

### Data Adequacy Assessment (Table 1)
- Overall assessment: Data provision is adequate for surveillance.
- Median Rating by sector: A A A A A A A
- Questionnaire Results (Detailed ratings by data quality characteristic):
  - Coverage: A A A A A
  - Granularity:
    - Top/bulk cells: B   A A A
    - Bottom cells:     A   A
  - Consistency:     A A   A
  - Frequency and Timeliness: A A A A A

### Rationale for staff assessment
- Greece’s economic and financial statistics are described as comprehensive, generally of high quality, and provided with a calendar of dates for the main statistical releases.
- Greece is subject to Eurostat and European Central Bank statistical requirements and has adopted the European System of Accounts 2010.
- Specific issues flagged for further improvement:
  - Reduce discrepancies between production- and expenditure-side quarterly GDP to attenuate fluctuations in changes in inventories (a balancing item).
  - Reduce discrepancies between headline GDP and its components in quarterly seasonally adjusted series.
  - Publish decomposition of public and private investment in quarterly GDP releases to help granular assessment.
  - Consider publishing flash GDP estimates and align timing of inflation data release with euro area peers to enable timely cross-country assessment.
  - Publish historical data revision for both annual and quarterly GDP at the same time to enhance consistency between them.
  - Assess and, as needed, improve alignments of financial and non-financial accounts to consistently capture real and financial activities across economic sectors.

### Changes since last Article IV consultation
- Recent revisions in balance of payments statistics to incorporate deferred interest payments on EFSF loans are aligned with accrual-based recording and improve consistency with fiscal data.

### Corrective actions and capacity development priorities
- Staff suggests authorities consider options to address the issues above, involving concerted efforts across institutions, including data collection and sharing.

### Use of data by Fund staff
- Staff does not use data and/or estimates different from existing official statistics.

### Other data gaps
- Publicly-available data on execution of NGEU-funded investments is limited.
- Capturing the informal economy in official statistics would be enhanced through continued efforts and broad policy measures, including anti‑tax evasion measures.

### Data Standards Initiatives (Table 2 and Table 3)
- Greece subscribes to the Special Data Dissemination Standard (SDDS) since November 2002 and publishes data on its National Summary Data Page.
- Table of Common Indicators Required for Surveillance: entries are reported as of April 30, 2026 (dates in the table include “30-Apr-26”, “Mar-26”, “Apr-26”, “Dec-25”, “2025Q4”, “Feb-26” and related frequency/timeliness codes).  
  - Data provision to the Fund includes: Exchange Rates; International Reserve Assets and Reserve Liabilities of the Monetary Authorities; GDP/GNP; Reserve/Base Money; Broad Money; Central Bank Balance Sheet; Consolidated Balance Sheet of the Banking System; Interest Rates; Consumer Price Index; Revenue, Expenditure, Balance and Composition of Financing (General Government and Central Government); Stocks of Central Government and Central Government-Guaranteed Debt; External Current Account Balance; Exports and Imports of Goods and Services; Gross External Debt; International Investment Position.

*Source: Annex V. Data Issues (1grcea2026001).*

### 8. While fiscal sustainability has improved notably, unintended fiscal drag remains an

### 8. While fiscal sustainability has improved notably, unintended fiscal drag remains an

### Personal Income Tax (PIT) framework and recommendations
- Finding: Unintended pressures on households and sharp marginal‑rate spikes arise from the current PIT framework.
- Recommendation: Introduce indexation, or a transparent, rules‑based mechanism for regularly adjusting PIT brackets, credits, and thresholds (for example in line with inflation or wage growth).
- Expected benefits of indexation:
  - Prevent unintended increases in effective tax rates.
  - Preserve progressivity.
  - Support household incomes without repeated ad hoc rate cuts.
  - Improve targeting of relief to low‑ and middle‑income households.
- Cross‑country evidence: Automatic PIT indexation is not widespread globally—around 34 of 192 countries either automatically adjust PIT thresholds or adjust them regularly without a clear legal rule (“de facto”).
- Regional prevalence: It is more common in Europe, with around 35 percent of countries have either automatic indexation or de facto indexation.

### Staff simulations: scenarios, multipliers, and debt dynamics
- Purpose: Assess the tradeoff between growth and debt dynamics under five stylized scenarios.
- Scenarios 1–3 (moderately more expansionary than the April 2026 WEO baseline):
  - Primary surplus reduced by 0.5 percent of GDP per year.
  - Fiscal multipliers of 0.5, 0.75, and 1.0 respectively.
- Scenarios 4–5 (larger fiscal expansion):
  - Primary surplus reduced by 1.0 percent of GDP per year.
  - Multipliers of 1.0 and 0.0 respectively (the latter illustrates non‑productive fiscal policies).
- Key simulation findings:
  - Multiplier = 0.5: Impact on debt is limited—public debt‑to‑GDP ratio about 2 percentage points higher than the baseline after ten years, alongside a higher level of GDP.
  - Multiplier = 1.0 (moderately sized expansion): If fiscal resources are directed toward more growth enhancing uses, the public debt‑to‑GDP ratio declines relative to the baseline despite a lower primary surplus.
  - Large expansion allocated to non‑productive uses (multiplier = 0.0): The debt ratio rises substantially above the baseline in scenario 5.

### Public sector balance sheets, fiscal space, and use of resources
- Finding: Public sector balance sheets have strengthened markedly; the public debt‑to‑GDP ratio has declined rapidly, creating space for further growth‑enhancing fiscal policy.
- Authorities’ actions using fiscal space:
  - Reductions in social security contributions.
  - Reductions in personal income taxes.
- Staff view: Further growth‑enhancing fiscal policy—such as higher capital and critical social spending (healthcare and education) to address remaining structural gaps and support income convergence with euro area peers—would not derail the downward trajectory of public debt over the medium to long term.

### Public debt dynamics and sustainability (supporting contextual projections)
- Recent change: Gross debt‑to‑GDP ratio decreased by about 65 percentage points in 2025 from its peak in 2020.
- Projected levels:
  - Projected to reach 136.8 percent in 2026, down from 146.1 percent in 2025.
  - Under staff’s baseline:
    - Decline to about 130 percent next year.
    - About 110 percent in 2031.
    - Cross the 100 percent mark in 2035.
    - Cross the 60 percent mark in 2054.
- Stress scenario: If GDP growth drops from baseline 1.6 percent to 0.8 percent after 2038, and the primary surplus from baseline 2.7 percent drops to 2.3 percent from 2034 to 2038 and to 1.5 percent thereafter, the public debt‑to‑GDP ratio still declines firmly but at a slower pace to the 100 percent mark in 2054.
- Gross financing needs (GFN):
  - Baseline: expected to remain contained at around 3.8 percent of GDP on average up to 2030, thereafter fluctuating above that level but never exceeding 8 percent.
  - Less favorable scenario above: GFN never exceeds 10 percent.
  - Comparison benchmark: These figures are substantially lower than the 15 percent benchmark.
- Structural factors reducing debt distress risk:
  - Ultra‑long maturities, high share of official debt at low fixed rates, extended grace periods.
  - Continued large debt reductions, projected high primary surpluses.
  - Favorable interest rate and growth differential.
  - Very large cash buffer of 16 percent of GDP (equivalent to about three times gross financing needs).
- Market financing plans and recent issuance:
  - In 2026, Greece plans to issue EUR 8 billion in Greek Government Bonds (GGBs).
  - January 2026 issuance: EUR 4 billion in 10‑year GGBs at a yield of 3.47 percent.
  - Re‑openings placed in February and April with yields of 3.34 percent and 3.70 percent respectively.
  - Spreads vs. German Bunds: around 80 basis points.
  - Credit ratings: Greece enjoys investment‑grade ratings from all major agencies; Moody’s upgraded the sovereign in March 2025.
- Liability management and repayments:
  - Greece has reduced rollover risks through disciplined liquidity management, fully repaid its outstanding IMF obligations ahead of schedule, and prepaid significant portions of bilateral loans under the Greek Loan Facility (GLF).
  - Authorities plan to fully repay the GLF loans by 2031—10 years ahead of schedule—using part of the cash buffer.

### Fiscal performance, medium‑term fiscal strategy, and recent measures
- Medium‑Term Fiscal‑Structural Plan 2025–28:
  - Anchors policy around a credible net expenditure growth path.
  - Structural primary surpluses projected to remain at about 2.0-2.3 percent of GDP throughout the planning horizon.
  - Net expenditure definition: government expenditure net of interest payments, discretionary revenue measures, expenditure on EU programs financed by EU and national sources, cyclical unemployment benefit spending, one‑offs and other temporary measures.
  - Spending priorities: public sector wage adjustments, pension indexation, health and education spending, defense, and public investment.
- Fiscal outcomes and targets:
  - Headline fiscal surpluses: 1.3 percent in 2024 and 1.7 percent in 2025 (first time in more than sixty years headline surpluses recorded).
  - Primary balance evolution:
    - Primary deficit of -4.8 percent of GDP in 2021.
    - Primary surplus of 2.0 percent in 2023.
    - Primary surplus of 4.8 percent in 2024.
    - Primary surplus of 4.9 percent in 2025.
    - Authorities expect a primary surplus of 3.2 percent and a headline surplus of 0.2 percent in 2026.
- Drivers of revenue mobilization:
  - Digitalization and tax compliance reforms: real‑time POS integration, electronic invoicing through the myDATA platform, digital labor card application, expanded use of electronic payments, digital audits, and stricter enforcement.
  - VAT compliance gap reduced from 24 percent in 2019 to 9 percent in 2024.
- Net expenditure plan outcomes:
  - Plan target: cumulative increase of net expenditure not exceeding 6.5 percent and 10.4 percent for 2024-2025 and 2024-2026 respectively.
  - Actual corresponding outcome for 2024-2025: 2.8 percent.
  - Projected outcome for 2024-2026: 10.4 percent.
- January 2026 fiscal package (about 0.7 percent of GDP) includes:
  - Broadly targeted personal income tax cuts for low and middle‑income families with children and young workers.
  - Pension enhancements.
  - Public sector wage increases for uniformed employees.
  - Adjustment measures to civil‑service pay grids.
  - Targeted housing affordability measures: tax relief on rents, tax incentives for new construction, property tax reductions in small municipalities, and incentives to bring vacant properties to the market.
- Additional temporary energy‑related measures: A set of temporary and largely well targeted energy‑related measures of about (text ends).

*Source: STAFF REPORT FOR THE 2026 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX (GREECE).*

### 0.3 percent of GDP were adopted more recently. This package includes (a) a subsidy on diesel to contain fuel costs

### 1grcea2026001 - 0.3 percent of GDP were adopted more recently. This package includes (a) a subsidy on diesel to contain fuel costs

### Fiscal measures and targeted social support
- The authorities adopted a package worth 0.3 percent of GDP.
- The package components:
  - a subsidy on diesel to contain fuel costs and mitigate price pressures across the supply chain for April and May;
  - a pre-paid card for fuel subject to income criteria to offset increased fuel costs for two months without blunting the price signal at the pump;
  - a subsidy covering part of fertilizer costs for the period March 15-Augusst 31, 2026 to provide targeted support to farmers and agricultural businesses;
  - an allowance per child to families to be disbursed in June 2026 subject to income criteria to provide one-off financial support to safeguard their purchasing power in response to increased inflation.
- Fitch Ratings has praised Greece for broadly bucking the trend by not using blanket energy subsidies.
- The authorities now project net expenditure to rise by 7.5 percent in 2026 and 10.4 percent cumulatively in 2024-2026 (vs. 3.6 percent and 10.0 percent respectively in the plan).
- The plan fully complies with its limits by utilizing flexibility from activating the national escape clause for defense expenditure.

### Defense spending
- Defense expenditure is projected to increase by 0.4 percentage points of GDP from 2024 to 2026, bringing Greece’s defense spending to 2.6 percent of GDP.
- Defense spending is elevated, reflecting geopolitical realities, while remaining fully incorporated into the medium-term fiscal framework.

### Financial sector stabilization and performance
- Credit expansion: 7.7 percent at end-March 2026 (particularly in corporate lending).
- Household lending growth: 2.8 percent at end-March 2026.
- Mortgage lending growth: turned positive for the first time in 2025 following a period of prolonged deleveraging.
- Non-performing loan ratio: 2.5 percent for Significant Institutions (record lows).
- Tier 1 capital: 15.5 percent system-wide.
- Dividend distributions resumed in 2024, reflecting supervisory confidence in bank resilience.
- Institutional and regulatory reforms:
  - regulatory framework for credit servicers upgraded;
  - judicial reforms improving case resolution times;
  - insolvency framework supported by advanced digital platforms to facilitate debt restructuring and recovery;
  - out-of-court workout mechanism effective in delivering large-scale restructurings while safeguarding vulnerable borrowers.

### Macroprudential measures and borrower-based measures (BBMs)
- Countercyclical capital buffers (CCyB): Bank of Greece increased CCyB by 25 bps to its positive neutral (PN) CCyB level (0.5 percent), effective October 2026.
- Borrower-based measures implemented effective January 2025:
  - caps for debt service to income and loan-to-value ratios of 50 percent and 90 percent for first time buyers;
  - caps of 40 percent and 80 percent for second and subsequent buyers, respectively.
- Rationale: prudent lending standards as mortgage credit expansion turned positive in 2025.

### FSAP findings, stress testing, and recommendations
- The first Financial Sector Assessment Program (FSAP) for Greece since 2006 finds financial stability risks are currently low and manageable despite increased global uncertainty.
- Banking system characteristics:
  - dominated by four systemically important banks with stronger balance sheets, improved profitability, and ample liquidity;
  - improvements largely reflect extensive NPL reduction through securitization schemes and sales since 2019.
- Stress testing results:
  - Greek banks are resilient to adverse macroeconomic conditions, including inflation shocks and severe recessions;
  - capital levels remain above regulatory thresholds in tested scenarios;
  - profitability provides a buffer against potential loan impairments;
  - liquidity positions are robust, with vulnerabilities appearing only in extreme and unlikely scenarios.
- Institutional assessment:
  - macroprudential framework assessed as sound;
  - Bank of Greece plays an active and effective role;
  - supervision of less significant institutions is strong.
- FSAP recommended further strengthening to align with international best practices, including:
  - enhancing legal protections for resolution actions;
  - improving preparedness for alternative resolution strategies;
  - further strengthening insolvency and creditor rights frameworks, especially judicial processes and enforcement timelines;
  - intensifying oversight of credit servicers with greater transparency and coordination across agencies.

### Structural reform agenda, investment, and growth transformation
- Structural reforms remain central to raising potential growth and resilience; a comprehensive reform agenda is in its seventh year, anchored in the National Recovery and Resilience Plan “Greece 2.0” under the NGEU program.
- EU funding allocations exceed €70 billion, serving as a catalyst for investment, productivity gains, and economic transformation.
- Policy priorities:
  - improvements in the business environment and reductions in administrative burdens;
  - support for firm growth and innovation;
  - enhanced labor market flexibility and skills development—particularly in digital and green sectors;
  - support for labor force participation through reductions in non-wage costs, childcare facilities expansion, targeted training, and inclusive labor market policies.
- Social reforms: focus on improving targeting, promoting social cohesion, reducing poverty and inequality, and enhancing labor market incentives; housing affordability, demographic challenges, and social inclusion are highlighted.
- Digital transformation: advances in public administration, justice, health, education, and taxation to support efficiency and productivity.
- Green transition objectives:
  - phasing out lignite by 2028;
  - raising the share of renewables in electricity generation to 82 percent by 2030;
  - achieving net-zero emissions by 2050.
- Progress to date:
  - in 2025, the share of renewables in electricity production reached 50 percent (one of the highest in the EU);
  - reduced electricity prices and alleviated the impact of war on energy costs;
  - expansion of gas infrastructure and strengthening of regional energy security while reducing Europe’s energy dependence on Russian gas;
  - accelerated emissions reductions since 2005.
- Remaining objectives: continued policies addressing transport, buildings, energy efficiency, climate adaptation, and mobilizing private green finance.

### Authorities’ stance and concluding assessment
- Authorities broadly agree with the FSAP systemic risk assessment and support the recommendations.
- They assess the banking system as well positioned to absorb potential losses under adverse scenarios and remain committed to addressing crisis legacy issues.
- Priority actions endorsed by authorities include streamlining the insolvency framework, strengthening supervision of credit servicers, promoting efficient workouts of distressed debt, monitoring macroprudential stance, and considering additional buffers should risks increase.
- The authorities remain committed to prudent macroeconomic management, sustained reform implementation, and inclusive, sustainable growth.
- Conclusion: Greece has achieved a decisive economic turnaround with restored macroeconomic stability, fiscal credibility, debt sustainability, financial sector resilience, and reform momentum, though risks remain from global uncertainty, geopolitical tensions, climate change, and adverse demographics.

*Source: 1grcea2026001 - 0.3 percent of GDP were adopted more recently. This package includes (a) a subsidy on diesel to contain fuel costs*

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_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1grcea2026001.pdf_