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EC Amends Decision On Greek Deficit Reduction

by Ulrika Lomas,, Brussels

10 September 2010

The European Council has adopted a decision amending decision 2010/320/EU on the strengthening of budgetary surveillance and the reduction of the government deficit in Greece.

According to the Council, in the light of a report submitted by the Greek government on August 6, this decision modifies decision 2010/320/EU in a number of respects, whilst maintaining a 2014 deadline for the reduction of Greece's deficit below the reference value set by the EU treaty (3% of gross domestic product).

Decision 2010/320/EU, adopted by the Council on May 10, sets out conditions for the granting of stability support to Greece via bilateral loans from the other member states of the euro area.

On May 2, the Euro Group concluded that market access was insufficient for the financing of Greece's debts and agreed to activate stability support.

Last month, European Economic and Monetary Affairs Commissioner Olli Rehn said that Greece has managed "impressive budgetary consolidation during the first half of 2010 and has achieved swift progress with major structural reforms."

But despite positive budgetary developments over the first half of 2010, including a 46% deficit decline and a 16.9% reduction in total state cash spending compared to the first half of 2009, the Commission said that “risks” still remained.

Amid much public protest, the Greek parliament approved a fiscal austerity package earlier this year which contains a number of increases in taxation, including a rise in the value-added tax rate to 23%, increases to fuel, alcohol and tobacco levies, and a windfall tax on corporate profits. Other initiatives contained in the bill include plans to freeze public sector pay until 2014, to increase the average retirement age by two years, and to cut public sector wages and pensions.

TAGS: tax | economics | European Commission | value added tax (VAT) | fiscal policy | gross domestic product (GDP) | budget | corporation tax | Greece | Europe

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