Greece ends tax spat ahead of new inspection

Last Updated: Wed, Apr 03, 2013 20:15 hrs

Parties in Greece's coalition government announced a compromise Wednesday over an emergency tax seen as a symbol of harsh austerity measures — a move that came just hours before bailout lenders are due back in Athens.

A dispute over the property tax levied on household electricity bills had threatened to throw conservative Prime Minister Antonis Samaras' coalition government into crisis.

But junior coalition partners met for nearly three hours with Samaras and agreed to reform the tax that had been due to be scrapped later this year.

Troubled eurozone member Greece has been relying on international bailout loans for the past three years to stay out of bankruptcy.

Debt inspectors from the European Union, European Central Bank and International Monetary Fund — known as the troika — are due in Athens on Thursday to review the progress of Greek budget-cutting measures required for future bailout payments.

Creditors are seeking faster implementation of Greece's programs for privatization and reform of its bloated public sector, and are looking to see whether reforms already approved by parliament are being implemented.

The emergency property tax levy is highly unpopular in Greece.

"The tax will be collected for one more year on electricity bills before the Tax Office assumes collection next year," Finance Minister Yannis Stournaras told reporters after the meeting.

Finance Ministry officials have acknowledged that the Tax Office is currently unable to cope with the additional demands placed on it due to successive austerity taxes, and still requires the electricity billing system to help with tax collection. Public revenues remain below target in a country struggling through recession since late 2008.

On Wednesday, the leader of Greece's largest industry group challenged government forecasts that the country will return to growth next year.

"The numbers don't add up ... the recession in 2013 is deepening, and the return to growth in 2014 will not happen," Dimitris Daskalopoulos, leader of the Greece Federation of Enterprises, said.

He argued that Greece's private sector had been too badly weakened by austerity measures to recover this year, and that the banking crisis and bailout of nearby Cyprus had also taken an unexpected toll on Greek public finances.

Ahead of the troika visit, ferry workers held a 24-hour strike Wednesday to protest labor reforms that unions say will undermine their collective bargaining rights. A strike planned for Thursday by civil aviation workers was called off after a court declared the protest illegal.

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