The Greek government will raise the national minimum wage to €920 gross from April 1, a move long flagged as part of its effort to support household incomes.
But with conflict in the Middle East pushing up energy prices and inflationary pressures intensifying, the increase takes on greater urgency even as its ability to ease the burden on households remains limited.
The decision also exposes a growing tension in economic policy: how to deliver higher wages while acknowledging that much of the benefit may be eroded by the very cost pressures it is meant to offset.
Alongside the increase, the government has introduced support measures including fuel subsidies, fertilizer aid and interventions in ferry ticket pricing, reflecting its own assessment that external shocks are driving a fresh wave of price increases.
Wage gains lag cost pressures
The €40 gross increase provides a clear, if modest, boost for workers. Yet it comes at a time when the cost of living—particularly energy, housing and food—continues to rise at a faster pace.
This imbalance is especially pronounced in Greece, where purchasing power remains the weakest in the eurozone.
According to Eurostat, Greece ranked alongside Bulgaria in 2025 at 68% of the EU average in per capita GDP measured in purchasing power standards (PPS), the lowest in the bloc. The metric reflects not just economic output, but what consumers can actually afford once price differences are taken into account.
Even as wages rise, real purchasing power remains constrained relative to the rest of Europe.
A structural imbalance
The increase is expected to affect roughly 700,000 workers, offering some immediate relief. But the broader debate suggests the problem runs deeper than the level of the minimum wage itself.
The government has framed the move as part of a steady upward path, marking the sixth consecutive increase and reaffirming a commitment to raise the minimum wage to €950 by 2027.
At the same time, labor unions argue that the current trajectory falls short. The General Confederation of Greek Workers (GSEE) estimates that a minimum gross salary of €1,052 will be required by 2026 to meet basic living standards.
In practice, the government, employers and unions start from different positions, but converge on a shared constraint: the pace at which inflation absorbs each new increase.
The timing gap
Behind closed doors, discussions between government officials and market participants increasingly focus on timing.
Wages are adjusted periodically, often once a year. Prices, by contrast, rise continuously.
Businesses may see a short-lived boost in consumption following wage increases. But if energy costs remain elevated, that effect tends to dissipate quickly as higher expenses—from utility bills to transport—feed through into the broader price structure.
The result is a recurring pattern in which nominal wage gains are gradually overtaken by persistent inflation.
Businesses under strain
Employer groups broadly support the increase as a means of sustaining consumption. At the same time, they describe it as an additional burden at a time when many companies—particularly small and medium-sized enterprises—are already under pressure.
Businesses are grappling with higher energy costs, pricier inputs, rising rents, and increased tax and social security contributions. In that environment, higher wages risk adding to cost pressures that are difficult to absorb.
As a result, employer groups are calling for offsetting measures, including reductions in non-wage labor costs, tax relief and targeted support for smaller firms.
Risk of a price pass-through
There is also concern that part of the wage increase could feed back into inflation.
If businesses pass higher labor costs on to consumers, some of the gains for workers may be offset by further price increases—limiting the overall impact on real incomes.
This dynamic reinforces the sense that wage policy alone cannot address the cost-of-living pressures currently facing the economy.
A fragile equilibrium
Greece’s economic structure compounds the challenge. Heavy reliance on imported energy and relatively high indirect taxes on fuel mean global price shocks are passed through quickly to consumers, amplifying pressure on household budgets.
The same dynamic extends to food, as higher energy costs feed into transport and production.
In that environment, the government’s effort to lift wages risks being continually offset by rising costs—leaving real incomes largely unchanged.
source: ot.gr
