Greek PM to unveil plan to boost pensions, spending power in major speech

By Lefteris Papadimas and Renee Maltezou

ATHENS (Reuters) - Greek Prime Minister Kyriakos Mitsotakis is expected to unveil plans on Saturday to increase pensions, reduce social security contributions and improve public services in an effort to win back voters angered by a lingering cost of living crisis.

In his annual speech on the economy, Mitsotakis will focus on boosting purchasing power and increasing funding for education and healthcare, three government sources told Reuters, as he paints a picture of a country emerging from a decade-long debt crisis.

He is also expected to unveil measures to increase housing and halt a tumbling birthrate, which would be financed through the reduction of funds for unemployment benefits.

The government plans to spend 3 billion euros on the measures in 2025 alone, amounting to about 1.5% of GDP, a second government official said.

"The PM will highlight the government's ... determination to further increase public investment and efficiency in the public sector, particularly in areas of high societal and long-term economic significance such as health, education, security and civil protection," a senior government official said.

The prime minister is trying to balance appeasing voters and maintaining fiscal prudence. Greece has achieved higher than targeted primary surpluses the last few yeas, making space for additional spending without endangering its economic health.

The country is still recovering from a 2009-2018 debt crisis that wiped out nearly a fourth of its economic output and saw it nearly fall out of the eurozone. Years of austerity imposed by international lenders reduced wages and pensions.

While Greece has staged a steady recovery - the government has raised the minimum wage and increased pensions - many ordinary citizens still feel the pinch.

Unemployment is near 10%, the second highest in the EU, and GDP per capita in purchasing power is among the lowest in the bloc, just as food and energy prices have risen. The impacts of climate change, including devastating wildfires and floods, have also squeezed public finances.

Mitsotakis' centre-right New Democracy party, re-elected in 2023 on pledges to increase wages, has seen a drop in popularity, reflected in a loss in seats in European parliamentary elections this year.

"The PM will confirm the government's strong commitment to fiscal prudence," the official added. "Greece will build upon its significant economic progress over the past five years."

(Reporting by Lefteris Papadimas and Renee Maltezou; Editing by Edward McAllister and Philippa Fletcher)