The climate-fiscal timebomb: Greece

08 March 2026

Fiscal outlook

Greece recorded a 1.2% surplus and a debt-to-GDP ratio of 154.2% in 2024. Athens is running primary surpluses again and has been upgraded by credit agency DBRS.

Deficit measures the level of borrowing in a given year. Debt-to-GDP compares the total public debt to the size of the economy. Both are currently used to determine how much borrowing a member state is allowed to undertake. However, neither measure in itself determines a government’s capacity to sustain higher levels of public investment. Fiscal sustainability depends on growth, the multiplier effects of investment, interest rates, inflation, the structure of the economy and external risks such as climate change. NEF advocates moving away from strict numerical debt targets.

Rising climate costs

Climate shocks keep hitting: from Storm Daniel’s catastrophic floods (2023) to repeated heatwaves and fires impacting tourism nodes in 2024 – 25. The government has offered emergency compensation totalling millions of euro to hundreds of households and businesses affected by wild fires. The agricultural sector is heavily impacted. The sector contributes 3.3% to GDP, the third-highest rate in the EU; however, losses linked to severe drought driven by climate change are estimated at €2.6bn annually and are projected to approach €4bn over the next 25 years. Greece’s coast is also under threat, with nearly one-third of the Hellenic coastline eroding.

What NEF’s modelling shows

Organisation for Economic Co-operation and Development (OECD) projections show Greece’s GDP declining by 14% by 2050 and 20% by 2070 under current policies. Our modelling shows the following:

Under current policies (BAU – business as usual), Greece’s debt is 89 pps higher than the climate-agnostic baseline in 2050 and 276 pps higher in 2070.

With early EU mitigation and sufficient adaptation spending, debt is 86 pps higher in 2050 and 160 pps in 2070.

Delayed EU investments and insufficient adaptation results in higher debt levels of 79 pps in 2050 and 151 pps in 2070.

EU early action combined with global cooperation results in 17 pps higher debt levels than the climate-agnostic baseline in 2050 and 15 pps higher levels in 2070.

Progressive taxation, such as a wealth tax, combined with EU early action would increase debt by 67 pps in 2050 and by 120 pps in 2070 compared to the climate-agnostic baseline.

Note that Greece is an outlier: early action appears more costly than late action. This reflects top-down, assumption-heavy modelling and should be interpreted as illustrative rather than as forecasts. Adaptation costs allocated on the basis of GDP, CRI score and population and end up large relative to GDP: under an early action scenario, adaptation investment reaches around 3% of GDP in Greece. For all other countries it’s below 2%.