Greece – Fiscal Outcome for the First 11 Months of 2025

The primary balance of the state budget for the first eleven months of 2025 materially exceeds official targets, reinforcing Greece’s fiscal credibility narrative. However, a closer analysis indicates that the overperformance is driven largely by cash-flow timing effects, with limited structural fiscal improvement.

Key Analytical Takeaways

  • Revenue overperformance is largely attributable to the front-loading of Recovery and Resilience Facility (RRF) inflows, while expenditure under-execution mainly reflects payment deferrals (transfers, defence programs, and public investment).
  • Excluding extraordinary and timing-related factors, the net deviation versus budget targets is modest, offering no clear evidence of a permanent shift in underlying fiscal dynamics.
  • While the outcome supports credibility and reduces downside risk, it does not materially alter Greece’s long-term fiscal risk profile.

Market Interpretation

Markets view the result as positive but broadly anticipated. The fiscal picture is supportive for Greek government bonds, yet insufficient to trigger a new phase of re-rating. Relative valuation versus the rest of the euro-area periphery remains the key reference point.

Investment Positioning

Greek Government Bonds: Neutral

  • The strong primary balance lowers downside risk and supports carry.
  • However, current spreads already reflect much of the fiscal improvement.
  • Limited market liquidity and the absence of near-term catalysts constrain upside potential.

Strategically, we maintain a neutral allocation, favouring selected maturities where risk-adjusted carry remains attractive.
Tactically, we see more compelling relative-value opportunities elsewhere within the European periphery than in a pure directional Greek exposure.

Key Issues to Monitor

  • Full and timely execution of the Public Investment Programme (PIP) and deferred payments.
  • The final General Government balance on an ESA basis.
  • Fiscal discipline in 2026, absent cash-flow timing advantages.

Conclusion

2025 closes with a strong headline fiscal outcome, stabilising Greece’s investment narrative. The next phase will be determined by the country’s ability to convert temporary cash-flow overperformance into sustainable structural fiscal balance. Until then, Greek sovereign debt remains investable and stable, but not an obvious overweight.

State Budget – First 11 Months of 2025: Strong Primary Balance with Pronounced Cash-Flow Characteristics

  1. Headline Figures (Cash Basis)
    • Primary surplus: €12.7bn (vs. target of €7.7bn)
    • Cash balance: surplus of €5.16bn
    • Net revenues: €68.8bn (+€2.3bn vs. target)
    • Expenditures: €63.6bn (–€2.6bn vs. target)

At first glance, the result is exceptionally strong and reinforces Greece’s fiscal credibility heading into 2026.

  1. Quality of Overperformance: Less “Structural” Than It Appears

Revenues

  • Approximately €2.1bn of the revenue overperformance reflects earlier-than-scheduled RRF inflows (shifted from December to November).
  • Excluding RRF effects, the genuine revenue overperformance is limited to €186m (~0.3%).
  • Core tax revenues (VAT, personal income tax) are slightly above target—positive, but not indicative of acceleration.

Expenditures

  • Under-execution (–€2.6bn) is mainly due to:
    • deferred payments to social security funds and general government entities,
    • delays in defence-related expenditures,
    • postponement of public investment disbursements (PIP).

In other words, this reflects cash management rather than structural expenditure restraint.

The Ministry of Finance itself acknowledges that, excluding extraordinary and timing factors, the “clean” primary balance overperformance is limited to approximately €231m.

  1. Fiscal vs. Cash Accounting: A Critical Distinction

The Ministry rightly stresses that:

  • The figures relate to the Central Government, not the General Government.
  • Cash-basis results differ materially from ESA (accrual-based) fiscal outcomes.

For markets and rating agencies, the General Government balance on an ESA basis will be the decisive metric—where deferred payments inevitably reappear.

  1. Macroeconomic Assessment
  • Tax performance suggests resilience in consumption and income growth, but no clear acceleration.
  • Public investment spending has been delayed, which:
    • improves short-term fiscal metrics,
    • but shifts execution risk into 2026.
  • Dependence on RRF inflows remains a key pillar of the fiscal profile.
  1. Investment and Market Implications

Positives

  • Strengthens Greece’s fiscal credibility narrative.
  • Supports:
    • Greek government bonds via spread compression,
    • the post-investment-grade stability story.
  • Creates limited political space for targeted fiscal measures in 2026.

Constraints

  • The quality of the surplus is not fully repeatable.
  • Markets will focus on:
    • PIP execution,
    • the final ESA-based outcome,
    • compliance with tighter European fiscal rules.

Final Assessment

The eleven-month primary surplus is unquestionably strong in nominal terms, but less impressive on a structural basis. It primarily reflects revenue and expenditure timing rather than a permanent shift in the fiscal trajectory.

For markets, the picture remains constructive but not transformative. The real test lies ahead:

  • in full PIP execution,
  • in the final General Government result,

and in maintaining fiscal discipline in 2026 without cash-flow “support mechanisms”.