Greece’s government intends to bump up sales taxes for the third time this year and slash spending on health care. The new measures were included in the 2011 budget it submitted to parliament on November 18.
Prime Minister George Papandreou’s Panhellenic Socialist Movement (PASOK) government has already raised the sales tax twice this year. Papandreou had pledged not to introduce any measures that would cause more hardship for ordinary Greek citizens — such as new taxes.
But the government has formulated economic policy under European Union and International Monetary Fund “supervision” since it accepted a 110 billion euros (about $152 billion) loan from the IMF and eurozone states in May.
Papandreou’s unelected supervisors appear to have convinced him to break his pledge to the citizens of Greece.
The budget plan he unveiled would increase the lowest sales-tax rate to 13% from 11% and freeze pensions to achieve the 2011 targets.
The 2011 budget also slashes taxes — on non-distributed corporate profits to 20% from 24%.
It also hands firms in the country’s lucrative tourism sector a cut in value-added tax, reducing the 11% rate to 6.5%.
The budget plan foresees savings of 14 billion euros (almost $20 billion) through cuts in health care and military spending, as well as wage reductions at “unprofitable” nationalised companies.
PASOK’s EU-mandated austerity drive has plunged the country into a prolonged recession.
The finance ministry said the economy will contract by 4.2% this year and by a further 3% in 2011.
[Reprinted from Morning Star Online.]