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Greek PM announces cuts to crisis-era taxes

Tough times ahead for Greek Prime Minister Antonis Samaras

By Angeliki Koutantou and Deepa Babington

Greek Prime Minister Antonis Samaras on Saturday announced cuts to unpopular taxes introduced at the height of the country’s debt crisis, in a bid to show the nation that over four years of austerity are finally nearing an end.

The Greek premier, whose conservative party is trailing in opinion polls behind the anti-austerity, radical leftist Syriza party, said a heating oil consumption tax would be cut by 30 percent and a “solidarity tax” would also be reduced.

“This is the year that Greece has started to stand on its feet. It is still wounded, yes, but standing,” Samaras said in his annual state of the economy speech marking the end of the traditional summer break. “It is still wounded, yes. But its wounds are healing and it is looking to the future.”

Buoyed by improved investor confidence and signs of economic stabilisation, Samaras has pushed the country’s EU and IMF lenders to start rolling back austerity to kickstart growth and preserve the fragile political stability in Greece.

Greek officials brought up the issue of tax relief at talks in Paris this week with the lenders as part of the country’s latest bailout review, but there has been no confirmation yet they have agreed to the package. Samaras said details of the tax cuts would be presented in the country’s draft budget to be announced in October.

He also said a new taxation “roadmap” would be unveiled in the future, with the maximum income tax cut to 32 percent from 42 percent and the corporate tax rate reduced to 15 percent from 26 percent. A deeply unpopular property tax would also be cut, he said without providing any details.

The government on Saturday also confirmed that Greece will show growth in the third quarter, its first quarterly expansion since the start in 2008 of a crippling recession that has wiped out nearly a quarter of the country’s economy.

BACK TO GROWTH

Greece is expected to return to marginal growth this year after the six-year recession that has left more than one in four jobless and reduced household incomes by nearly a third.

“The country has stabilised and is entering the path of growth,” Samaras said.

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

In a sign of improved investor sentiment, Athens also returned to bond markets successfully this year with two bond sales that raised a total of 4.5 billion euros. That is expected to be followed by another bond sale before the end of the year.

Despite the reversal in fortunes, Athens still faces several outstanding issues before it can fund itself unaided.

The country is expected to need more debt relief, talks on which are expected to start after the country’s latest bailout review and European bank stress tests in the autumn.

Samaras said the country’s lenders would soon certify that the country’s debt is viable.

Athens also faces the risk of a fresh bout of political instability ahead of presidential elections early next year.Samaras’s government must secure the support of at least 180 lawmakers in the 300-seat parliament to push through the appointment of a new president, failing which parliament must be dissolved and new elections called.

The radical leftist Syriza party has vowed to block the nomination of a president, and Samaras has only the support of 154 lawmakers in his coalition of Socialists and conservatives.

Still, Samaras played down the prospect of early elections saying there was growing support for his coalition and warned that Greece would be tipped back into crisis with elections.

“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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