By Chrysostomos Tsoufis

Improvement in inequality indicators and greater strengthening of the lowest incomes shows the qualitative analysis of the most important measures of the government for 2025 that “runs” the Ministry of Finance in the draft budget submitted to Parliament.

The Ministry of Finance applied the measures to the incomes of 22,142 people corresponding to 10,202 households and as pointed out in the plan “using weighting factors, the population to which the simulations are applied, adds up to 10,306,111 people and 4,077,884 households”.

The simulation of the redistributive impact of his measures budget it can only be done in direct interventions such as personal taxes, insurance contributions and cash benefits.

Policies that do not directly affect household income, such as changes in corporate taxation, are not included in the analysis. In addition, policies that affect consumption or only liquidity in household incomes, such as changes in VAT, suspension of tax payments or loan installments, and subsidies on energy consumption, cannot be simulated.

Based on the above, the measures whose results are examined are:

  • The reduction of insurance contributions by 1 unit
  • The abolition of the pretense fee
  • The increase in pensions
  • The increase in salaries of civil servants
  • The reform of benefit policy (child benefit, housing benefit, minimum guaranteed income, social benefits)
  • Minimum wage increase (the government takes an increase of €40 or 4.8% as a basis for calculation)

The December severance allowance was applied to 2024 earnings. Also, dependent labor increases of 4.2% in 2024 and 2.7% were also factored into the respective years’ earnings

Dividing the disposable income (after subtracting direct taxes and contributions and adding possible social transfers, i.e. benefits and pensions) of citizens into deciles, the simulation shows that percentage-wise the greatest improvement will be seen by those in the lowest income bracket and the least by those in the highest :
2025
Decimal Base 2024 Absolute Change %
1 €3,661 €162 4.43
2 €5,955 €160 2.69
3 €7,350 €187 2.55
4 €8,553 €195 2.28
5 €9,836 €251 2.55
6 €11,134 €288 2.58
7 €12,698 €331 2.61
8 €14,592 €356 2.44
9 €17,363 €387 2.23
10 €26,897 €590 2.19

Total €11,791 €290 2.46

The simulation also shows that the measures help more young people to escape the poverty line (i.e. find themselves with an equivalent disposable income of more than 60% of the average equivalent disposable income) The poverty line is set at €6,298:

AGE BASE 2024 CHANGE 2025 %
0 – 14 19.4% -1.0
15 – 24 23.9% -3.3
25 – 49 16.8% -1.0
50 – 64 17.3% -1.4
65 – 79 13.2% -0.9
80+ 16.2% -1.4

In terms of household composition, percentage-wise more adults over 65 without children are favored, which is rather problematic since households with children should be favored more, especially when a whole reform of the criteria for granting benefits is planned

HOUSEHOLD COMPOSITION BASE 2024 CHANGE 2025 %

1 adult <65 18.8% -0.7
1 adult >65 20.8% -1.9
1 adult with children 31.1% -0.4
2 adults <65 15.1% -1
2 adults 1 child 14.9% -1.3
2 adults with 2 children 17.5% -1.1
2 adults with at least 23.8% -1.6
3 children

In conclusion, the basic measures of the budget improve the situation but not where it should be in terms of the composition of households and of course they do not solve the problem of poverty. Long-term policies are needed to have tangible results, especially when we are not running alone in the Eurozone