Vice-president and Finance Minister Evangelos Venizelos on Sunday announced a special tax to be imposed on all buildings in Greece, amounting on average to four euro per square metre of built surface. The tax will be calculated using social and other criteria and have a duration of two years.
The decision for the new tax was made during an emergency cabinet meeting held in Thessaloniki on Sunday, to be collected via the electricity bills of the Public Power Corporation (PPC). Collection of the new tax is envisaged to be completed by February so that it will be included in the fiscal year 2011, while more installments are envisaged in 2012.
In addition, the cabinet has decided to lop off one month's salary from all elected or appointed state officials, ranging from the President of the Republic to ministry general secretaries, to bring forward the vote on the 2011 budget to October 31 and to enlist the help of Greek shipping companies in the government's fiscal reform efforts.
Shortly before holding the press conference where he made these announcements, Venizelos spoke on the phone with main opposition New Democracy leader Antonis Samaras in order to brief him on the decisions of the cabinet.
Clarifying the measures further, Venizelos said that the new tax will be socially just and, along with the structural changes announced on Tuesday, sufficient to cover Greece's needs. He noted that the amount of the tax would differ according to the price zone of the property and its use, so that one person might have to pay just 0.50 euro per square metre while a luxury residence might pay as much as 10 euro per square metre.
The minister said that other criteria, such as unemployment, disability, family size and changes in land value, would also be taken into account, with further details to be announced on Tuesday.
He argued that the new tax was not a new financial burden: "The burden remains the same. But we need a mechanism to make up for reduced returns. In other words, we need to find something that is fair and socially acceptable, which differentiates between the rich, middle incomes and poor," he explained.
According to Venizelos, this was the only universally applicable measure that met those criteria.
Admitting that demands in September and October would be extremely high, the minister said that the government was short roughly 1 percent of GDP in order to achieve its targets.
"We have a shortfall because we do not have an integrated and effective state machinery, a tax administration that is able to run things," he said, adding that there was still an organised and unpenitent black economy and rampant tax evasion that prevented the relatively small sums needed in order to achieve budget targets from being collected.
Venizelos announced that the government will table the draft budget for 2012 on October 3, so that the vote can be held by the end of the month. At the same time, the national taxation system will also be tabled for a vote so that tax issues linked to payment of VAT or the correlation of income and assets can be settled.
On the salary cut for state officials, the minister said this will apply to all ranks of government, including the president, the Parliament president, cabinet ministers, MPs, ministry general secretaries, regional authority heads, mayors and the rest.
Explaining the aim of the additional measures, Venizelos said the government's first priority was to fully and completely carry out Greece's promises to its EU partners in relation to the bailout loans for the country.
This meant fully meeting fiscal targets for 2011 and 2012, which in absolute figures called for a public deficit of 17 billion euro in 2011 and of 14.9 billion euro in 2012, including the cost of servicing public debt.
He noted that the primary deficit that Greece had generated in 2009 in absolute terms, without taking into account the payment of interest on public debt, had exceeded 24 billion euro and that this was reduced to 11.2 billion euro in 2010.
"This year, if we fully meet our targets, the primary deficit will be just 1.8 billion euro, less than 1 percent of GDP. This means that if we implement our goals in 2012 as well, then the next year we will have a primary surplus of 3.0 billion euro for the first time. In other words, in March-April we will entered the clearing of primary surpluses," the minister said.
Commenting on the emergency decisions taken by the cabinet on Sunday, Venizelos said it had been called to deal with an extremely critical situation that had arisen in recent days in the Eurozone and the global market.
He stressed that the decisions were not triggered by the departure of troika inspectors from Athens on September 2 but the stance "of certain very important member-states that play a decisive role in Eurozone affairs," adding that these countries were externalising their internal issues so that these becames issues for the entire EU.
Opposition parties' reactions to FinMin's statements
Opposition parties reacted immediately to the measures announced on Sunday by government Vice President and Finance Minister Evangelos Venizelos.
Main opposition New Democracy (ND) party spokesman Yiannis Mihelakis said "recession cannot be intercepted with new recession measures" and that "the new unbearable measures that annul yesterday's (Saturday) speech by Mr. (Prime Minister George) Papandreou confirm the blatant failure of his government and throw new burdens on the backs of the Greeks. The government must realise that the Greeks can no longer stand more tax burdens."
The Communist Party of Greece (KKE) called for a "popular counter-attack to prevent, to reverse the antipopular policy of the present dangerous government and of whatever coalition government" and noted that "either the people will be saved or the profit-making of the plutocracy."
The Popular Orthodox Rally (LAOS) party said on its part that "PASOK no matter how much it keeps company with the troika's neoliberal views, the communist conception and theory remains deep inside its DNA" and that "we are the only country of Europe that in essence is still communist-dominated through the unions."
Lastly, the Radical Left Coalition (SYRIZA) said "the prime minister's cynical confession that unemployment will be the permanent companion of every home in our country in the coming years is enough for us to realise the magnitude of the disaster that he and the memorandum's policy brought about."