ATHENS – As renters are asking for and getting lower rents and home sales and values are plummeting because of Greece’s economic crisis, the government will raise the appraised value of homes so that a new emergency property tax will jump the assessments by an estimated 235 percent in an attempt to close a widening debt that is estimated to hit more than $515 billion next year, a staggering shortfall which no country has reached, almost assuring a long-predicted default is inevitable.
Government estimates in a new draft budget budget sets the debt at 181.8 percent of Gross Domestic Product, which means Greece is closing in on spending nearly twice what it takes in.
An increasingly desperate government, faced with that news, has decided to raise the assessed values of properties so that a new emergency property tax will take more out of homeowners pockets. The higher values will be accompanied by a reduction in the tax-free ceiling for real estate, which means Greeks and foreigners who own property will find their property taxes more than doubled, although even that will raise little more than $2 billion.
The property tax was a condition from the Troika of the European Union-International Monetary Fund-European Central Bank for Greece to get an installment of $11 billion this month as part of a first bailout of $152 billion in loans to keep from going bankrupt, and for a planned second bailout of $157 billion that critics said is just piling debt on debt and driving the country into certain bankruptcy.
Prime Minister George Papandreou continues to insist, however, that is not the case and that austerity measures, including waves of tax hikes, more pay cuts and the layoff and imminent sacking of 30,000 workers – with another 120,000 to go over the next four years, means Greece will be saved.
The newspaper Kathimerini said, “This budget may well be the last chance the government has to turn things around and lead the economy out of the recession, even if it does involve extremely painful measures for taxpayers.” The draft budget contains new measures to the effect of $9.3 billion, a single salary system for civil servants, reductions of up to 20 percent in pensions and bringing the price of heating oil up to the same level as that of diesel, a measure due to take effect from next October.
The government said that GDP will contract by 2.5 percent next year, against a forecast last year for a return to growth in 2012, while unemployment will come to 16.4 percent. Investment will shrink further, by 4 percent, while private consumption will go down by 3.8 percent. The aim is for a primary surplus of 1.5 percent of GDP. Revenues are projected to increase by 5.08 percent from this year, with all the focus being on taxing citizens more: Revenues from taxpayers are forecast to increase by 30.88 percent next year, to reach 54 billion euros. As for tax revenues from properties, they are seen growing by 2.65 billion euros, an amazing 235 percent hike.
Finance Minister Evangelos Venizelos issued a statement expressing confidence the country will meet its fiscal targets in 2012 although it has missed every estimate so far. “The fiscal streamlining as well as the fulfillment of the pledges our country has undertaken vis-a-vis its institutional partners for the decisive promotion of structural changes, form the conditions for the full application of the decisions the eurozone summit meeting made in July regarding Greece,” Venizelos stated.
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