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VAT 21%, the excise duties on cigarettes, alcohol and fuels are increased

04 March 2010 / 10:03:03  GRReporter
7187 reads

Victoria Mindova


Since today the Value added tax in Greece increases by two percent and from the current 19% it becomes 21%. The excise duty on the cigarettes and alcohol increases by 30% and for the fuels is introduced an additional tax of eight euro cents per liter for the gasoline and three eurocents per liter for the diesel. An additional tax is also introduced for the luxurious products – yachts, helicopters, precious metals, stones and expensive cars. By saying “expensive cars” we mean cars which have an end production value over 17 thousand euro or a market price of over 35 thousand euro. The government will collect additional 1,3 billion euro or this is half percent of the GDP until the end of 2010 from the additional increase on the excise duty on the fuels, cigarettes and alcohol. With the increase of the VAT the government expects to accumulate 2,4 billion euro. The books, magazines and print publications which were currently being taxed with 4,5% VAT will now be taxed with 5% and the food products, musical and theatrical plays which were currently being taxed with 9% will now be taxed with 10%.

With the additional measures about 4,8 billion euro or 2% of the GDP of the country will be saved. Half of them will come from the increase in the taxes and the other half from the decrease of the expenses in the public sector. By 30% will be decreased the Easter, Christmas and vacation salary for the government employees. By 12% will be decreased their bonuses and by 20% the allowances in the remuneration of the legal employees. At the same time the pensions of the government employees will not be decreased, however they will also not receive an increase. The special plan provides for a decrease of the expenses for medicines by 20% by carrying out public tenders for the securing of more competitive prices. There will also be a decrease in the government financing by 10% for the public enterprises for Water supply and Energy distribution. The governmental spokesmen Georgios Petalotis announced that there will be a 5% decrease of the expenses provided for under the National program for government investments which will save 500 million euro. Another 200 million euro will be cut from the Program for financing of the education.

The additional measures undertaken by the government of George Papandreou turned out to be inevitable. The Prime minister visited the resident of the republic Karlos Papulias in order to present to him the decisions of the Council of Ministers. When exiting the presidential residence the Prime Minister said: “I informed the president about the new measures which the government is forced to undertake. We have to fight with the speculative games of the foreign markets and to restore the normal rhythm of the country.” Papandreou described the measures as necessary and inevitable. “This is not a matter of choice, it is a necessary step of the country towards exiting of the crisis,” he explained.

“Historically today the country is in the worst financial situation which Greece has ever lived through. The national deficit in 2009 reached 30 billion euro and the foreign debt reached 300 billion euro and this calls for the additional measures,” said the government representative Georgios Petalotis, who presented in front of journalists the package of special measures for exiting of the crisis. All the measures described are stipulated in the new bill under the name “The protection of the national economy – additional measures for mastering the financial crisis”, which will be introduced for voting at the end of this week.

The first reactions against the new additional measures were not late as well. Over 400 pensioners went out on a procession in the center of Athens protesting against the introduction of the new restrictive measures of the government. From Syntagma square the protesting people went on “Vasilis Sofias” boulevard shouting “Keep your hands down from the salaries of the workers”, “We are not Ireland – we will not accept the robbery! We will fight together with our children!” When they reached the barricades of the special police forces MAT, the pensioners broke through on “Irodu Atikis” street and headed for the building of Megaro Maximou where the Prime Minister George Papandreou had to meet representatives of the working unions of the private and public sector as well as the organizations – employers. The pensioners kept on shouting different protests – “We have nothing to do with it – the oligarchy should pay back the money”, “Shame on you who ruled for so long!”, “We paid the Capital we are now paying the crisis! You will no longer steal from us!”, “We want explanation, not a decrease!”, “Keep your hands down from the 13th and 14th salary and pension!”

After a two hours protest with increased presence of the police and special forces for emergency actions, the pensioners went away threatening that the protests will continue. The protesting people say that the Greek population is not ready to accept a decrease of the salaries and the allowances and an increase in the taxes. Among the crowd of dissatisfied pensioners, voices were saying that the European union and the European commission want to “punish” Greece and the highest price will be paid by the common citizens. The fears of the protesting people are for mass impoverishment and long term deterioration of the local economy.

The measures were accepted with optimism outside of Greece and great pessimism inside the country.

“The measures are heavy, painful and with doubtful efficiency,” says the chairman of the National confederation of the Greek tradesmen Vasilis Korkidis. According to him there are no prerequisites for the provision of an economic growth which will lead to a long recession with unpredictable results. Korkidis is definite that in order to avoid a mass explosion the government has to clearly define the time frame of the additional measures. The opinion of the chairman of the Athens commercial industrial chamber Kostadinos Mihalos is similar. According to him the new measures are in the wrong direction. Mihalos believes that the government is threatening to suffocate the internal market which will inevitably lead to the bankruptcy of many small and medium sized companies. According to him with the bankruptcy of the small corporations taxpayers the unemployment will increase out of control and the income in the national treasury will suddenly decrease.

On the other hand the chairman of EUROGROUP Jean Claude Juncker congratulated the Greek government on the daring and decisive measures which it introduced and expressed his confidence that Greece will execute the four percent decrease of the national deficit by the end of 2010. The minister of finance of Germany Wolfgang Schomple also welcomed the actions of the Prime Minister George Papandreou and said that the additional measures in Greece will help it to rehabilitate the stability of the common European currency.

Tags: EconomyMarketsPoliticsSociety
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