Greece Eyes Tax Cuts To Spur Economy

Greek Finance Minister Yiannis Stournaras
Greek Finance Minister Yiannis Stournaras

ATHENS – Greek Finance Minister Yiannis Stournaras said the country’s coalition government will try to persuade international lenders to allow a reduction in some taxes, particularly the 23 percent Value Added Tax (VAT) that is killing restaurants and taverns as tourist season looms.

He also defended a drop in expected tax revenues that came despite big tax hikes that came along with big pay cuts and slashed pensions as part of austerity measures being imposed by the government on the orders of international lenders.

In an interview with the newspaper Kathimerini, Stournaras acknowledged that Greeks can’t stand any more austerity measures, buried under pay cuts, tax hikes and slashed pensions that have made many unable to afford not only their tax bills, but food and other necessities.

“We understand that a lot of families have reached their limits,” he said Stournaras in an interview with the paper.  “This is why we negotiated hard for the emergency property tax to be reduced by 15 percent despite the Troika’s objections.”

He was referring to the hated so-called “Haratsi” a doubling of the property tax by former finance minister Evangelos Venizelos, now head of the PASOK Socialists who are one of the partners in the coalition government headed by the New Democracy Conservative leader Samaras.

Envoys from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) are due back in June for another assessment of reforms before signing off on another installment as part of a second bailout of $173 billion.

The coalition government led by Prime Minister Antonis Samaras wants changes in the civil service that doesn’t tie promotions only to seniority as many younger people in Greece are held back by a system that doesn’t reward competence or merit.

Stournaras said the Troika inspectors will be asked to show some leniency. “During their next visit, we will examine reducing other levies, such as Value Added Tax (VAT) for food service. Also, we will take another look at the special consumption tax for fuel,” Stournaras said.

He played down concerns that falling revenues in other areas are a sign that Greece will have difficulty meeting its targets. “There is a myth that revenues are collapsing,” he said. “The data that I have seen show that while we are off target in some areas, such as consumption taxes, we are making up for it by beating targets elsewhere.”

Stournaras said net revenues for the first quarter of 2013 were just above the Troika’s target. “The mistake that many people make is to compare this year’s revenues with last year’s,” he said. “We knew that revenues would be lower this year because of the continuing recession and that is reflected in the targets we have agreed with the Troika. The only comparison that should be made is against the targets,” although the net result is still less money.

He also said that 15,000 civil service sackings agreed with Greece’s lenders were part of a wider plan to improve the efficiency of the public sector. He said that younger personnel would play a part in achieving this goal.

“The improvement of the civil service does not consist of continual dismissals,” he said. “But it is an ongoing process, which can happen through regular training of our personnel and the promotion of younger and abler personnel to high-ranking positions. We have agreed to reduce the amount of time served that is needed before a promotion can take place.”

Labor unions are fiercely resisting the idea in the public sector while the country’s largest union, representing private workers, has called for a May 1 general strike to protest policies that have pushed unemployment to a record 27.2 percent.


  1. You are so right but unfortunately our leftists loved to spend and spend other people’s money on themselves. We had a chance to make far more moderate cuts years ago but the far leftist dominated unions and leftist groups kept protesting (as these extremists still do today when they very well know our government has no money to give them)

    Now because we are burderened with debt, it is much harder to cut taxes. We shouldn’t be too repressive with tax cuts as it will only create deficits now. They have to be moderate cuts spread out over years. This is the only way we have any hope of balance budgets but at same time weening ourselves off excessive taxation and services our leftist welfare queens demanded for themselves.

  2. when Greece has failed to collect 80% of the taxes it should have over the last 10-15 years, it already in effect had its tax cuts. this is not the problem right now. the problem is the structural issues associated with the EU exacerbated by the traitors in government who do anything for Germany.

    The liquidity tsunami that started in September of 2012 in the Marriner Eccles building and continued with the BOJ’s own epic QEasing expansion three weeks ago, has so far provided the impetus for Europe to kick the can of its inevitable dissolution for a few more months, yet slowly but surely the market is starting to read through the artificial levels implied by Italian and Spanish bonds, driven by recycled ECB funding via bank and repo conduits and of course Japanese carry cash, and rumblings of a return to crisis conditions are back.

    And as always happens, once the crisis talk is back, so is discussion of a fiscal union. Sure enough, earlier today Germany’s Angela Merkel once again reminded everyone just what the stakes are in order to achieve a truly stable, and sustainable European union: nothing short of ceding sovereignty to Germany. And with that we are back to square one, because that has always been the trade off – want a unified, fiscally and monetarily, Europe? You can get it: just bow down to Merkel.

    From Reuters:

    German Chancellor Angela Merkel said on Monday that euro zone members must be prepared to cede control over certain policy domains to European institutions if the bloc is truly to overcome its debt crisis and win back foreign investors.

    Speaking at an event hosted by Deutsche Bank in Berlin alongside Polish Prime Minister Donald Tusk, Merkel also defended her approach to the crisis against critics who argue she has put too much emphasis on austerity, saying Europe must find a way to deliver both growth and solid finances.

    The comments came two months before European leaders are due to gather in Brussels to discuss moving towards a so-called “fiscal union”.

    The punchline:

    “We seem to find common solutions when we are staring over the abyss,” Merkel said. “But as soon as the pressure eases, people say they want to go their own way.

    “We need to be ready to accept that Europe has the last word in certain areas. Otherwise we won’t be able to continue to build Europe,” she added.

    Two conclusions here: Europe will be “staring over the abyss” very soon once again, and where Merkel says “Europe” she means Germany.

    This is confirmed by the immediate denial of precisely this, adding “it would be “dangerous” if other countries in Europe felt Germany was imposing its own economic model across the entire bloc.”

    Oh, ok then.

    So just what is Germany’s vision for “Europe”:

    “We don’t always need to give up national practices but we need to be compatible,” Merkel said. “It is chaos right now.”

    “We need to be prepared to break with the past in order to leap forward. I’m ready to do this,” she said.

    So… just give up national practices sometimes. And yes, Merkel is of course ready to head the asset-stripmined continent. The question is who else in Europe is willing to hand over their liberties to the next iteration of the German Reich?


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