Friday, June 10, 2011

New austerity measures approved in Greece

The Greek government gave Thursday, June 9th green light for tabling in Parliament of the 2012-2015 multi-year budget plan including new austerity measures and a wave of privatizations, following a cabinet meeting more than six hours. After long debates in the political organs of the socialist party, Pasok, and in the Socialist parliamentary committee, the Cabinet finally approved the plan, dictated by the European Union and the International Monetary Fund, comprising 28 economies, 4 billion euros by 2015, including 6.4 billion to achieve in 2011.

Eagerly awaited by the country's creditors, the green light should be followed by the deposition Thursday in parliament the text, which must be voted by the end of the month. The Socialists have a majority of 156 seats out of a total of 300. In early July, the EU and the IMF will then proceed to the payment of the fifth tranche of 12 billion euro loan to the country in 2010 and a total of 110 billion euros over three years.

Without major changes, but reviewed in detail in order to quell the social unrest and nervousness of Socialist deputies, the plan provides for the acceleration of privatization (which should bring 50 billion euros by 2015) and further increases of taxes, reducing the payroll of the public and certain social benefits.

The bill also provides for the introduction of a compulsory contribution outstanding. This measure replaces last minute lowering the ceiling for exemption on the income tax that was originally announced. An exceptional increase in 2011 taxes on the trappings of wealth such as yachts, swimming pools and luxury cars is also planned, while some products that hitherto enjoyed a reduced VAT rate to 13% will reach the common rate 23% from the month of September.

Retirees under age 60 receiving pensions are subject to an exceptional tax contribution of 8%, which must provide 176 million euros over 2011 and 2012. The government plans to tighten control of illegal work, which should bring 1.3 billion euros from 2013, until 2015.

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