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Greek Austerity Package Clears Hurdle

by Ulrika Lomas,, Brussels

04 July 2011

Following a heated and tense debate, much as expected, the Greek parliament voted to adopt the government’s second bill implementing its new economic recovery plan, providing for dramatic tax rises, deep cuts in spending and rapid privatisation measures.

Paving the way for the release of a further EUR12bn in emergency aid from the European Union (EU), the European Central Bank and the International Monetary Fund (IMF), and marking a further step forward to securing a second international bailout agreement worth in the region of EUR110bn, the bill was adopted by 155 votes to 136.

Commenting on the outcome of the vote in a joint statement, President of the European Commission Jose Manuel Barroso and President of the European Council Herman Van Rompuy stated that:

“We strongly welcome today's approval by the Greek Parliament of the implementing legislation for the country's revised economic programme. This was the second, decisive step Greece needed to take in order to return to a sustainable path. In very difficult circumstances, it was another act of national responsibility.”

“The conditions are now in place for a decision on the disbursement of the next tranche of financial assistance for Greece and for rapid progress on a second assistance package. We reiterate Europe's unwavering support and solidarity for the Greek people, in whose future we are confident. In view of the hard work that still lies ahead, we repeat our call for all political parties to work together to take their country forward.”

Yet although the immediate danger of bankruptcy appears for the time being at least to have been averted, as protests on the street continue, and as deep unrest prevails, Greek Prime Minister George Papandreou may struggle against the tide of discontent to implement the government’s fiscal plans.

The EUR28.4bn economic recovery plan includes plans to lower the minimum income tax threshold from EUR12,000 currently to EUR8,000, to impose a windfall solidarity tax of between 1% and 5% on annual income in excess of EUR12,000, to increase the existing tax on heating oil and to impose a business tax on self-employed individuals in Greece of around EUR300 a year.

Germany’s Finance Minister Wolfgang Schäuble also confirmed recently that German banks have agreed to support a new bailout package, based on a French plan for a voluntary debt rollover, contributing around EUR3.2bn to the plan.

TAGS: individuals | tax | business | European Commission | luxury tax | tax thresholds | self-employment | legislation | Germany | Greece | individual income tax | European Union (EU) | Europe

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