Greece has announced drastic measures worth up to €1.6bn, to address a demographic crisis of unprecedented scale which the Greek prime minister has called one of the biggest challenges facing the Mediterranean nation.

The news comes as the country announced the closure of 700 schools due to falling pupil numbers.

“We know that the cost of living is one thing if you don’t have a child and another if you have two or three children,” Kyriakos Mitsotakis said on Sunday after announcing the policies. “So, as a state we should find a way to reward our citizens who make the choice [of having children].”

The measures, which range from a 2 percentage point reduction for all tax brackets to a zero rate for low-income families with four children, will be rolled out in 2026, said Mitsotakis.

With fertility rates in Greece among the lowest in Europe – at 1.4 children a woman, the reproduction rate is well below the replacement level of 2.1 – Mitsotakis has called the problem a “national threat”.

Acknowledging the decline had assumed existential proportions, finance minister Kyriakos Pierrakakis said fertility rates had halved since the start of the country’s economic crisis 15 years ago.