In today’s global economy – which is increasingly beginning to resemble a Roman-era arena marked by ruleless competition – the key question is how the newly announced (and then partially reversed) web of high tariffs by the US president will be implemented. This move risks intensifying the likelihood of a near-term crisis while also reshaping the rules going forward.
Domestically, economic and political discourse during this same period has been dominated by discussions of public sector salary increases, particularly in defense and other uniformed services, either already announced or under consideration for the near future.
There is no doubt that the primary goal of economic policy must be to raise citizens’ incomes – especially in a country where those incomes were sharply reduced during the decade-long debt crisis. The objective of economic growth should be the systematic increase in average income levels, supported by two key conditions: first, a stronger safety net for those who, either consistently or temporarily, lack sufficient income; and second, the creation of conditions that foster economic mobility, ensuring everyone has access to meaningful opportunities. In this context, the target of further increasing real incomes over the next two years is not only legitimate – it is vital.
However, if income growth proceeds without alignment to fundamental economic indicators, it risks undermining the economy’s progress. This is especially true for an economy like ours, which is striving for long-term momentum while working to overcome structural weaknesses. And it is doubly true when the global outlook becomes increasingly volatile. These risks are evident both in aggregate terms and in underlying systems and processes. On average, an economy cannot sustain income growth that persistently outpaces productivity. And in terms of processes, it is critical that compensation reflects workers’ effort and contribution – not their political leverage.
Only recently has the public debate turned to key questions: How much further can the minimum wage be raised? What support might older pensioners receive? Should the 13th and 14th monthly salaries be reinstated for public sector employees? And should the pay increases granted to uniformed personnel in the Ministry of Defense be extended to other groups?
If income growth proceeds without alignment to fundamental economic indicators, it risks undermining the economy’s progress
Of course, economic recovery must be felt as higher household incomes. But in a country that effectively went bankrupt not long ago, any decisions about compensation must be approached with prudence.
Two further related observations are crucial. First, the post-pandemic recovery of the economy, in terms of GDP, has consistently outpaced the European average – but it is based primarily on employment growth and investment, without yet showing a significant rise in productivity. Second, the current account deficit, which had essentially been eliminated after the bailout programs, has returned to high levels, signaling that further increases in real incomes will not come easily.
What is happening today in the global economy calls for vigilance and adaptability. The coming developments are expected to be turbulent, both in real markets and in financial sectors. The economies that will come out ahead are those that invest more in high-value sectors and strengthen their institutional frameworks.
In fiscal terms, our country’s clear priority should be to reduce taxation on wage earners, which has effectively increased in real terms due to inflation. In the public sector, salaries are generally low and need to be raised, but this should happen alongside service restructuring and a shift in priorities – something that can also be supported by digital infrastructure. Our economy has rebounded strongly, but still lags in productivity and employment. It cannot remain carefree in the face of new global disruptions. It would be wise to position itself both defensively and opportunistically, as the forthcoming opportunities are likely to be significant.
Nikos Vettas is general director of the Foundation for Economic and Industrial Research (IOBE) and a professor at the Athens University of Economics and Business.