February 26, 2024

Greece Approves Property Tax in Bid for Rescue Aid

The property tax, the first of its type in Greece, would raise 2 billion euros, or $2.7 billion, this year alone, according to government calculations. The question is whether enough Greek people can or will pay the tax to meet those forecasts.

“I know that a lot is being asked of the Greek people,” the German chancellor, Angela Merkel, said on Tuesday in Berlin during a joint news conference with the Greek prime minister, George A. Papandreou.

Mr. Papandreou was in Berlin for talks with Mrs. Merkel, who sought to sway public opinion ahead of a vote Thursday in the German Parliament on a bill that would bolster the main European bailout fund, known as the European Financial Stability Facility.

“Through the euro we are closely bound together and the weakness of one affects us all,” she said during the joint news conference.

Meanwhile, lawmakers in Slovenia voted Tuesday to approve their share of the rescue fund’s guarantees. Finland’s Parliament is expected to reluctantly approve the fund measure in a vote on Wednesday, despite formidable domestic opposition. All 17 members of the euro zone must ratify the expanded fund, a process that has delayed its adoption.

The Greek vote on the property tax was widely seen as a crash test for Mr. Papandreou’s embattled Socialist Party, which must in coming weeks pass bills for similarly controversial measures, like a plan to place 30,000 public workers on reserve status with reduced wages for the next 12 months. Greek opposition parties say the reserve-status plan is a prelude to layoffs.

The vote indicated that Mr. Papandreou had managed to rally Socialist lawmakers despite enduring party rifts over the government’s austerity drive.

But public opposition to the new tax was clear Tuesday as a small but vehement group of demonstrators clashed with police outside Parliament as lawmakers voted. In addition, thousands of public transport workers walked off the job in the latest in a series of 24-hour strikes protesting salary cuts and feared layoffs as state bodies are merged and abolished.

The tax, which will apply to 5.5 million homeowners — or about 80 percent of Greek households — will cost the average family 800 to 1,500 euros (about $1,045 to $2,041) a year, depending on the location and size of their property. With unemployment at 16 percent, and average income only about 26,000 euros, it is unclear how many households will be willing or able to pay.

Greek leaders, though, moved to assure their foreign creditors that they would keep promises to address the economic and political shortcomings that are the underlying reason the country cannot pay its debts without help.

The Greek finance minister, Evangelos Venizelos, said that auditors from the European Union and the International Monetary Fund were due to return to Athens this week. Earlier this month, they left the country in what was viewed as a display of dissatisfaction with Greece’s progress on cutting the size of government and removing barriers to economic growth.

Mr. Venizelos confirmed that the I.M.F.’s managing director, Christine Lagarde, whom he met with in Washington last weekend, had requested written guarantees from the government on the timetable for the new measures and projected revenue. The measures include additional wage and pension cuts.

Speaking to the European Parliament in Strasbourg on Tuesday, Jean-Claude Juncker, president of the group of euro zone finance ministers, said talks had broken off this month because of difficulties “in finding common ground between what the Greek government was expected to do and what it was able to do.”

Since then, the situation had improved, Mr. Juncker added, though he said it was too soon to determine whether Greece had met the conditions for its next round of emergency financing.

Mrs. Merkel, meanwhile, said she was confident Greece would fulfill conditions set by international lenders, and promised that Germany would be supportive.

But she tempered her remarks by insisting that Germany was “not available” for further steps like jointly issued bonds guaranteed by all euro zone members — an idea that Germany has staunchly resisted. And the German finance minister, Wolfgang Schäuble, ruled out an increase in the size of the euro zone bailout fund, though not necessarily an increase in its ability to borrow.

The fund will have the power to buy European government bonds and recapitalize struggling banks. But some analysts have said the fund needs to be two or three times bigger to remove any doubts about its impregnability.

Mr. Schäuble also said Tuesday that it was likely that the rescue mechanism would be further “enhanced,” though he would not give details. He said that any improvements to the fund would have to be done in an “efficient way” that did not overburden Germany and the six other countries with top credit ratings that are essential to giving the rescue fund a credit rating of AAA.

Lorenzo Bini Smaghi, a member of the executive board of the European Central Bank, also seemed to offer cautious support for increasing the fund’s ability to borrow on open markets.

“Markets want more,” Mr. Bini Smaghi said at a conference in New York. “We need to look at possible leverage.”

In Tokyo, the Japanese finance minister, Jun Azumi, suggested that his government might contribute toward a bailout effort for Greece if European leaders were able to devise a reasonable plan to calm market fears.

Mr. Azumi said that he would “not rule out the possibility that Japan would bear some of the burden” in a bailout, provided there was a plan “that involves a steady process and a reasonable amount of funds that would bring markets a sense of security over the Greek bailout.” He did not comment on how big a possible Japanese contribution might be.

The German Confederation of Trade Unions took out advertisements in several big newspapers urging lawmakers to vote yes on the rescue package. “Our mothers and fathers built a peaceful Europe from the rubble of the second world war,” the unions wrote. “It is our responsibility that we maintain a united Europe for our children and our grandchildren.”

Reporting was contributed by Matthew Saltmarsh, Judy Dempsey, Landon Thomas Jr., Stephen Castle and Hiroko Tabuchi.

Article source: http://feeds.nytimes.com/click.phdo?i=520658342b7120bc91b8459822fe5143

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