Bank of Greece Economic Bulletin, Issue 62
30/01/2026 - Press Releases
Today, the Bank of Greece published the latest issue of its Economic Bulletin (No. 62/December 2025).
The articles published in the Economic Bulletin reflect the views of the authors and not necessarily those of the Bank of Greece.
Issue 62 features the following three articles:
Maria Flevotomou and Nikos Ventouris: “Fiscal drag in Greece”
This article analyses the phenomenon of fiscal drag in Greece, defined as the increase in tax revenues that arises when nominal incomes grow, while the parameters of the personal income tax (PIT) system remain unchanged. The analysis is based on a microsimulation model.
In a first step, the article estimates the tax-to-base elasticity, which captures the responsiveness of PIT revenues to changes in the tax base and reflects the built-in progressivity of the tax system. The results point to a relatively modest elasticity, broadly in line with the euro area average, suggesting potential for fiscal drag. The elasticity is further decomposed by income source, tax parameter and across the income distribution.
In a second step, the article assesses fiscal drag in practice over the period 2019-23, by comparing actual PIT revenues with counterfactual scenarios based on alternative indexation practices. The findings show that tax policy reforms implemented during this period more than offset the potential effects of fiscal drag, keeping PIT revenues broadly stable as a share of GDP, while slightly reducing the average effective tax rate.
Overall, the results highlight that, during a period of rapid nominal income growth, Greece’s PIT reforms improved both the progressivity and the redistributive capacity of the tax system, while safeguarding fiscal revenue.
Hiona Balfoussia and Dimitris Papageorgiou: “Macroeconomic implications of a tax on banks’ profits”
This article explores the potential macroeconomic effects of imposing a tax on banks’ profits in the Greek economy, using a Dynamic Stochastic General Equilibrium model. The model allows the identification of the main transmission channels through which a temporary tax on bank profits may affect both the real economy and the financial sector.
The results indicate that such a tax operates primarily through the banking capital channel and the bank funding channel, constraining credit supply and reducing the value of banking collateral, which may ultimately lead to a contraction in economic activity. Although the redistribution of tax revenues to households acts as a partial mitigating mechanism, it is not sufficient to fully offset the negative effects of the tax, resulting in an overall negative impact on aggregate demand and GDP.
The article stresses that these transmission channels emerge within a theoretical modelling framework. In practice, the immediate impact on the Greek banking system may be limited, given the high levels of capital adequacy and liquidity of Greek credit institutions. Nevertheless, the analysis highlights the potential effects of such a policy measure and the importance of carefully evaluating its broader macroeconomic implications.
Evangelia Kasimati: “The role of travel-related services in the evolution of the Greek HICP”
This article investigates the role of travel-related services – in particular package holidays, restaurants and hotels, and passenger air transport – in the evolution of the Harmonised Index of Consumer Prices (HICP) in Greece. Given the significant contribution of tourism to the Greek economy, the analysis focuses on how the prices of these services interact with broader inflationary dynamics.
The article begins with an overview of the HICP and the national Consumer Price Index (CPI), highlighting methodological similarities and differences in the treatment of travel-related services. It then examines the contribution of individual travel-related services components to the overall HICP, using official monthly data and decomposition techniques.
The article further traces the historical evolution of prices, identifying seasonal patterns, structural changes and the impact of major economic events, such as the COVID-19 pandemic and the subsequent recovery. Finally, a cross-country comparison across euro area countries is employed to identify sources of heterogeneity in travel-related services inflation. The findings provide useful insights for both inflation measurement and economic policy.
Related information:
Issue 62 also includes the abstracts of Working Papers published by the Special Studies Division of the Bank’s Economic Analysis and Research Directorate between July and December 2025.
Related link:
The full text of Issue 62 is available on the Bank of Greece website: Bank of Greece Economic Bulletin, Issue 62.