Juncker Urges Greece To Commit To Austerity Deal

by Ulrika Lomas, Tax-News.com, Brussels

09 November 2011

Luxembourg’s Prime Minister and head of eurozone finance ministers Jean-Claude Juncker has called for Greece’s new government to pledge its commitment in writing to the bailout deal agreed with eurozone leaders at the end of October, to secure release of the next tranche of international aid by mid-December.

Following a recent meeting in Brussels, ministers welcomed the Greek decision to form a coalition government of national unity, although warning that cross-party support for the austerity package was a precondition for disbursement of the EUR8bn loan payment.

Underlining the need for sustained cross-party consensus and assurances on the second Greek rescue programme, beyond the February elections, Juncker emphasized that a letter from the new Greek prime minister is expected shortly. The letter is to be co-signed by the two main political party leaders, confirming their commitment to previously agreed conditions.

Commenting on the ultimatum, European Union Economic and Monetary Affairs Commissioner Olli Rehn explained that it is now imperative that Greece rebuilds confidence, destroyed following the announcement by outgoing Greek Prime Minister George Papandreou of plans to hold a referendum on the bailout deal.

Defending his decision, Papandreou argued at the time that he required wider political support for the government’s proposed – and highly unpopular – fiscal and economic reform measures.

The measures unveiled at the end of September, which followed a catalogue of other increases in taxation over the last year, included plans to reduce the tax-free allowance on annual income tax from EUR8,000 currently to EUR5,000, applicable to 2011 income, and to extend the government’s proposed new property tax, initially set to expire next year, to 2014.

Together with plans to accelerate reforms and privatizations, the government also proposed increasing the tax levied on domestic fuel and introducing further cuts in public sector pensions. As part of a labour reserve programme, up to 30,000 civil servants would also face job losses this year.

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