Fiscal outlook
Greece recorded a 1.2% surplus and a debt-to-GDP ratio of 154.2% in 2024. Athens is working major surpluses once more and has been upgraded by credit score company DBRS.
Deficit measures the extent of borrowing in a given yr. Debt-to-GDP compares the entire public debt to the dimensions of the economic system. Each are presently used to find out how a lot borrowing a member state is allowed to undertake. Nevertheless, neither measure in itself determines a authorities’s capability to maintain increased ranges of public funding. Fiscal sustainability is dependent upon progress, the multiplier results of funding, rates of interest, inflation, the construction of the economic system and exterior dangers reminiscent of local weather change. NEF advocates shifting away from strict numerical debt targets.
Rising local weather prices
Local weather shocks preserve hitting: from Storm Daniel’s catastrophic floods (2023) to repeated heatwaves and fires impacting tourism nodes in 2024 – 25. The authorities has supplied emergency compensation totalling tens of millions of euro to tons of of households and companies affected by wild fires. The agricultural sector is closely impacted. The sector contributes 3.3% to GDP, the third-highest charge within the EU; nonetheless, losses linked to extreme drought pushed by local weather change are estimated at €2.6bn yearly and are projected to strategy €4bn over the subsequent 25 years. Greece’s coast can also be beneath risk, with practically one-third of the Hellenic shoreline eroding.
What NEF’s modelling exhibits
Organisation for Financial Co-operation and Growth (OECD) projections present Greece’s GDP declining by 14% by 2050 and 20% by 2070 beneath present insurance policies. Our modelling exhibits the next:
- Beneath present insurance policies (BAU – enterprise as regular), Greece’s debt is 89 pps increased than the climate-agnostic baseline in 2050 and 276 pps increased in 2070.
- With early EU mitigation and enough adaptation spending, debt is 86 pps excessiveer in 2050 and 160 pps in 2070.
- Delayed EU investments and inadequate adaptation ends in increased debt ranges of 79 pps in 2050 and 151 pps in 2070.
- EU early motion mixed with international cooperation ends in 17 pps increased debt ranges than the climate-agnostic baseline in 2050 and 15 pps increased ranges in 2070.
- Progressive taxation, reminiscent of a wealth tax, mixed with EU early motion would improve debt by 67 pps in 2050 and by 120 pps in 2070 in comparison with the climate-agnostic baseline.
Notice that Greece is an outlier: early motion seems extra expensive than late motion. This displays top-down, assumption-heavy modelling and ought to be interpreted as illustrative relatively than as forecasts. Adaptation prices allotted on the premise of GDP, CRI rating and inhabitants and find yourself giant relative to GDP: beneath an early motion state of affairs, adaptation funding reaches round 3% of GDP in Greece. For all different nations it’s beneath 2%.
Picture: iStock
