Next batch from austerity pot served
Tax hikes, spending cuts necessary to save country from catastrophic fiscal road, says minister
The government yesterday detailed the next round of tax hikes and spending cuts Greeks will be hit with aimed at supporting its midterm plan and helping secure further funding from creditors to prevent the country from defaulting.
Finance Minister Giorgos Papaconstantinou said that a reduction in public sector employees and less defense spending, along with tax hikes for salary earners and ad- ditional property levies, will be used to help meet this year’s budgetary goals.
“We have the choice of going down the difficult road or the road of catastrophe,” the minister told reporters. “There is no way of forgetting about the debt and deficit and going back to the past.”
Late on Thursday, the government announced a five-year fiscal plan which aims at saving almost 30 billion euros and raising an ad- ditional 50 billion euros via an agressive privatization program.
Additional measures worth 6 billion euros will be needed for 2011 alone to get the country’s fiscal consolidation program back on course after a deeper-than-expected recession this year cut into state revenues.
Public servants, estimated to number about 1 million, will be reduced by 150,000 people by 2015, while the Defense Ministry’s op- erating expenses will be cut by half a percent of GDP, or some 1.1 billion euros, in the next five years. Spending on defense equipment will also be cut, added the minister.
As far as revenues are concerned, taxpayers will be hit with a new tax of between 1 and 4 percent over the next five years while public servants will also be called upon to contribute to a fund to support the country’s growing army of jobless workers.
The reforms, approved by the Cabinet on Thursday, will head to Parliament early next week and are expected to be voted in by the end of the month. Papaconstantinou said the government will examine the possibility of lowering value-added taxes in September and also simplify the tax system after holding talks with other political parties.