Greek cost of living and agricultural policy concerns

Vasilis Kokkalis, President of INKA Thessaly, has raised concerns regarding the rising cost of living and inflation in Greece. Kokkalis emphasized that addressing inflation requires investigating the full cost chain from production to retail, identifying energy costs as a primary driver. He criticized the government’s National Initiative for Price Reduction as insufficient due to its voluntary nature and highlighted a lack of transparency in the supply chain.

Expanding his critique to agricultural policy, Kokkalis argued that the government’s portrayal of the sector deviates from the reality faced by producers. He noted that farmers in the Thessaly region are still awaiting substantive restoration and a real plan for productive reconstruction following storms Daniel and Elias, while also facing delays in subsidies and rising production costs.

In response to the broader cost-of-living crisis, Prime Minister Kyriakos Mitsotakis has rejected the possibility of reducing Value Added Tax (VAT) to combat rising prices. Speaking at the IMF, Mitsotakis argued that only a small fraction of tax reductions actually reach consumers. Citing a Bank of Greece study, the Prime Minister suggested that during temporary VAT reductions, the pass-through effect to final prices ranges between 19% and 25%. The administration stated it prefers using funds for targeted support for low-income households rather than horizontal VAT cuts.

Critics have noted that the Bank of Greece study focused on short-term impacts of temporary measures and does not establish a permanent rule, adding that permanent VAT reductions could have a significantly stronger impact on prices than the government’s narrative suggests.