ATHENS (Reuters) -Greek Prime Minister Kyriakos Mitsotakis on Saturday announced generous income tax breaks to boost households with children, part of a tax reform worth 1.6 billion euros ($1.87 billion).
The tax deductions, announced during his yearly speech on economic policy, come as his government seeks to halt a slide in popularity caused by a protracted cost of living crisis and corruption claims.
Strong economic growth, a higher-than-expected budget surplus and more comprehensive tax collection will help finance the package, which will come into force in 2026, Mitsotakis said.
“We are all well aware that Greeks are struggling to make ends meet. Therefore our non-negotiable priority is to prop up their income,” he said.
After a 2009-2018 debt crisis marked by years of economic pain, Greece’s economy, driven by tourism, has revived and is approaching its pre-crisis size.
But Greece remains Europe’s most indebted nation and disposable incomes still trail the EU average due to rising energy, food and housing prices that hurt purchasing power, despite a cumulative 35% minimum wage increase.
The tax reform includes lower taxation by two percentage points for all brackets and a zero tax rate for low-income families with four children amid tumbling birth rates and rising housing costs.
Mitsotakis also announced increases in pensions, while a real estate tax for remote areas will be scrapped to encourage young people to leave big cities and move to the countryside.
Mitsotakis’ centre-right New Democracy party has seen its ratings drop to around 22-25% in opinion polls since June from the 41% of votes it won in 2019 when it came to power on pledges to redistribute the fruits of economic growth more evenly.
Thousands of people joined separate protests organised by trade unions in the city of Thessaloniki, where Mitsotakis was giving his speech, demanding higher salaries and decent living standards.
($1 = 0.8542 euros)
(Reporting by Angeliki Koutantou and Lefteris Papadimas; Editing by Alexandra Hudson)
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