Samaras to cut crisis era taxes, as economy gets “back on its feet”

Prime Minister Antonis Samaras announced that a host of unpopular taxes, introduced as part of the debt-ridden nation’s efforts to exit the crisis, are to be abolished or drastically reduced and the economy gradually eases back on austerity measures imposed by the Troika of international lenders.

Samaras said in his annual “state of the economy” address at the Thessaloniki international fair on Saturday that the heating oil consumption tax would be cut by 30% and a “solidarity tax” would also be reduced.

“This is the year that Greece has started to stand on its own feet,” Samaras said in his speech, adding that “it is still wounded, yes. But its wounds are healing and it is looking to the future.”

Samaras has pushed EU and IMF lenders to start rolling back austerity demands to help kickstart growth and preserve a fragile political stability, as signs of economic stabilisation are leading to improved investor confidence.

Members of his cabinet brought up the issue of tax relief at talks in Paris last week with the Troika to review the progress of the bailout, but there was no confirmation that they had agreed to the package. Samaras said details of the tax cuts would be presented in the draft budget when it is announced in October.

He also said he was working on a taxation “road map”, in which the top rate of income tax would be cut in stages from 42% to 32% and the corporate tax rate reduced from 26% to 15%. A deeply unpopular property tax would also be reduced, he said, without providing any details. Samaras revealed in his speech that Greece would show marginal growth in the third quarter, its first quarterly expansion since the start of the six-year recession that has wiped out nearly a quarter of its economy and reduced household incomes by nearly a third.

Hours after Samaras spoke, thousands of public and private sector workers and leftist group PAME members rallied in Thessaloniki to protest against wage cuts and firings, reacting to the prime minister’s comments that civil servants’ productivity would be subject to review and that “the deserving workers will be rewarded, and those who are not productive would be punished.” He added that the men and women in uniform would see their wages reinstated, albeit gradually, as they had served “above and beyond” their duty in these troubled times and Greece needed a sense of stability, both internally and along its borders.

“These are half-measures that are not enough,” Yiannis Panagopoulos, head of the private sector umbrella union GSEE told the rallying crowd. “Greek people, workers and pensioners - our jobless fellows are suffering.”

The Greek economy has managed to stage an abrupt turnaround since nearly going bankrupt in 2012 and almost bringing down the euro with it. It remains the eurozone’s most indebted nation, with debt forecast to top 177% of GDP this year, but it has largely brought its finances back on track and posted a budget surplus before interest payments last year.

In a sign that investor sentiment is also improving, Athens returned to the international markets earlier this year with two bond sales that raised a total of 4.5 bln euros. Another bond issue is expected by the end of the year, but the economy still faces several hurdles before it can fund itself unaided.

Greece is expected to need more debt relief and talks with creditors are expected to start after the latest bailout review and eurozone bank stress tests are completed in the autumn.

There could also be political instability ahead of a presidential election early next year where Samaras’s fragile conservative-socialist administration could fail to secure the support of 180 of the 300 MPs to push through the appointment of a new president, after which parliament would be dissolved and a snap election held. That is why the Prime Minister is trying to woo respected politicians from the left of centre in order to gain the support of the majority in parliament.

“The time is approaching for the country to exit the bailout era once and for all and, if an early pre-election campaign starts right now, we will risk losing everything that we have achieved,” he said. “It would be political suicide for Greece.”