Greek PM pledges pension, wage hikes by 2027, within budget limits

ATHENS (Reuters) - Greek Prime Minister Kyriakos Mitsotakis promised on Saturday to increase pensions, cut taxes and social security contributions, and increase the minimum wage in 2025, looking to support people squeezed by the high cost of living.

Greece is still recovering from a debt crisis that wiped out nearly a fourth of its economic output in 2009-2018, due to austerity measures that included repeated wage and pension cuts.

But over recent years it has been achieving strong economic growth, which is seen at 2.5% this year.

In his annual economic policy speech at the Thessaloniki trade fair in northern Greece, Mitsotakis said Greece has changed, with strong economic growth that should be distributed in a balanced way, and be reflected in pensions and wages.

But he also promised to maintain fiscal prudence in line with European Union rules.

"I don't have with me today a bag with reckless handouts but only suggestions for useful and effective choices," said the leader of the centre-right New Democracy party, which came to power in 2019 and won a second term last year.

Greece will increase pensions by up to 2.5% in 2025 and will increase the monthly minimum wage from 830 euros ($920) to 950 euros gradually by 2027, he said, adding that social security contributions would be cut by 1 point.

A special levy on the self-employed will be gradually scrapped, while the 243 million euro revenue from a windfall tax on energy companies will be distributed to vulnerable citizens, he said.

A lingering cost of living crisis after the COVID-19 pandemic, the impact of devastating wildfires and floods, along with certain reforms, have put off some core voters of New Democracy, which has seen a drop in popularity according to opinion polls.

Greece will also spend 1.6 billion euros in 2025 to boost its defence, Mitsotakis said. And to help halt a tumbling birthrate, he pledged to extend a housing plan and support young parents with benefits and tax exemptions.

Mitsotakis also promised to boost civil protections, support farmers who have been hit by climate change, and reduce a property tax for home owners who insure their home against natural disasters, among other measures.

According to sources, the government plans to spend 3 billion euros in 2025 alone, amounting to about 1.5% of GDP.

Mitsotakis is expected to hold a press conference on Sunday.

($1 = 0.9023 euros)

(Reporting by Renee Maltezou and Lefteris Papadimas; Editing by David Holmes)