The international plan to fix Greece's finances is failing and needs a rethink, main opposition Nea Democracy (ND) party President Antonis Samaras said in an interview with The Wall Street Journal, his first with international media since becoming Greece's main opposition leader.
Instead of strangling the Greek economy with tax increases, Europe and the International Monetary Fund (IMF) should let Greece cut taxes to jump-start growth, Samaras said.
The austerity program for Greece "is a failure," Samaras said in his interview. Citing Greece's poor tax revenues amid a worsening recession, he said: "I think our lenders will have to change their policy. My question is why do we have to go further down the drain in the meantime?"
Samaras also warned that Greece will again fail to meet its budget targets under current policies. "In three months we'll be asking for more money," he warned.
Last week the ND pary voted against a new, five-year, 28 billion euros austerity plan in a hard-fought parliamentary vote. The measures, which the European Commission, the European Central Bank and the IMF have made a precondition for extending any fresh aid to Greece, passed with the support of the ruling PASOK party.
Samaras said he agrees with government plans to cut spending and sell 50bn euros of state-owned assets. But he argued the latest tax increases will only compound Greece's economic and fiscal woes.
The solution, he said, is to slash corporate taxes rates to 15 per cent from 24 per cent now, while also lowering taxes on everything from personal income to tourist lodgings to fuel.
Sharply lower tax rates, Samaras added, would produce a "creative shock" that would stimulate business investment and consumer demand, while also reducing incentives for tax evasion, a chronic problem in Greece.
"Part of economics is psychology, and you need a demonstration effect to show investors that this is an economy that you can invest in - whereas right now money is being taken out of the economy and supply is being killed," the ND leader said.
The resulting growth would close Greece's budget deficit faster than the grim austerity plan demanded by Greece's international creditors, he argued.
Samaras also told the newspaper what he told German Chancellor Angela Merkel, during an European People's Party (EPP) summit in Brussels late last month. He said he told the German chancellor that his program offers the only solution for Greece, and by extension for the stability of the euro zone.
"I told Merkel: Look, if your plan works, then I am wrong," Samaras said. "But if it doesn't work, then you are going to need a new plan and I'm the one who can bring that about."