According to a recent Economic Brief by senior officials at the European Commission’s Directorate-General for Economic and Financial Affairs, Greece is poised to experience one of the most dramatic fiscal shifts in the eurozone — moving from the strongest fiscal stimulus in 2026 to one of the sharpest fiscal contractions in 2027. This abrupt transition stems directly from the expiry of the EU’s €800 billion Recovery and Resilience Facility (RRF), which has been a key engine of public investment in Greece over the past several years.
Greece Tops Eurozone Stimulus Rankings in 2026
This year, Greece ranks at the top of the eurozone — alongside Estonia — for expansionary fiscal policy, with stimulus estimated at nearly 2.75% of GDP. Crucially, this boost does not reflect broad-based increases in national government spending. Rather, it is driven almost entirely by the accelerated implementation of projects funded by EU grants, particularly under the RRF, whose final disbursements are scheduled for 2026.
Greece is among the eurozone countries where RRF and other EU-funded expenditures deliver fiscal support exceeding 0.5% of GDP. Domestic investment also contributes significantly — especially defense-related outlays, including major equipment purchases and broader military spending.
A Sudden Fiscal U-Turn in 2027
In 2027, the picture changes sharply: RRF funding ceases entirely, replaced only partially by other EU instruments such as the Cohesion Fund or the Connecting Europe Facility. Under a ‘no-policy-change’ scenario, Greece’s overall fiscal stance flips from strongly expansionary to markedly contractionary — with the fiscal brake reaching approximately 1.5% of GDP.
Greece joins Bulgaria, Portugal, and Cyprus as eurozone members facing the largest negative fiscal impact from the RRF’s conclusion. Importantly, this shift does not automatically imply an official announcement of tax hikes or spending cuts of equivalent magnitude. Instead, it reflects the sheer scale of the drop in EU grant absorption between 2026 — when disbursements peak — and 2027, when that funding stream dries up.
Nonetheless, the numbers highlight a substantial financing gap that must be bridged — whether through increased national budget allocations, alternative EU tools, or stronger private investment — to avoid a sudden collapse in investment momentum.
Defense Spending Rises, But Falls Short of Filling the Gap
Part of the shortfall is offset by rising defense expenditure. Greece has activated the EU’s national security exemption clause, allowing it to bypass certain fiscal rules. Total defense spending is projected to climb from 2.2% of GDP in 2024 to 2.4% in 2025, 2.6% in 2026, and then dip slightly to 2.5% in 2027. Purely investment-grade defense outlays — such as new equipment — grow even faster: from 0.2% of GDP in 2024 to 0.8% in 2026 and 0.9% in 2027.
Yet despite this upward trend, the RRF gap remains large. Greece is among the eurozone economies most reliant on RRF grants to finance its recent investment push — underscoring how critical the fund has been to its post-pandemic recovery trajectory.