Measures aimed at tackling cost of living will return, Finance Minister Makis Keravnos announced on Thursday, as zero VAT will be implemented for a number of products.
His statements were made after a meeting with President Nikos Christodoulides at the presidential palace, who earlier pledged action would be taken.
Keravnos said there will be zero VAT on diapers for infants and adults, baby milk, female hygiene products, fruit and vegetables.
The decision is expected to be ratified in the next Cabinet session. Keravnos underlined that the measure mainly targets young couples and the middle class.
“We have come up with some additional measures that are mainly aimed at vulnerable groups, but also at the middle class as a whole and young couples,” he said.
“Watching the price developments, we feel that at this moment – as we have said many, many times that we are watching the developments in the economy and in society – it is time for this category of products to be brought back to zero VAT.”
Keravnos said as a result of the government’s economic policy, the middle class has been strengthened in terms of population and has risen from 58.6 per cent in 2005 to 64.1 per cent.
“The guiding principle of any economic and social policy has always been to strengthen the middle class, which has traditionally been the backbone of the economy and society.”
The economic policy the government is pursuing is one that aims not only for financial stability, sustainability and resilience, but for strengthening the middle class and vulnerable groups in this difficult financial and geopolitical environment.”
Opposition party Akel had slammed an earlier government decision not to extend the electricity subsidy and zero per cent VAT over key items.
The finance ministry had defended its policy, arguing that inflation rates are expected to stabilise at two per cent. Energy costs and fuel prices have also gone down, and state intervention in the market should be avoided for extended period of times, it specified.
The measure had been in place from March 2023 until October 2024, and has come at a cost of €201 million, according to the finance ministry.
Earlier in the day, Christodoulides said the government had taken the initiative to reform the country’s tax system.
“A key component of the country’s fiscal transformation is to strengthen the middle class of our country, which has been the backbone of the economy and society.”
The President gave an apparent dig over the mounting criticism over cost of living, calling on everyone “not to take advantage of the difficult times some of our compatriots are going through.
“We’ve seen where those policies drove the country.”
