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

Financial Mirror (Cyprus) - - FRONT PAGE -

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.”

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