THESSALONIKI, Greece — Greece’s cash-strapped government said Sunday it would impose a new property tax on top of existing austerity measures, to compensate for a revenue shortfall that is threatening to disrupt its vital international bailout program.
The government also decided, in a symbolic move aimed at a public angry at politicians, to dock a month’s pay from all elected officials — from the head of state to the country’s 325 mayors.
“It is better that we all lose something than lose everything, forever,” Prime Minister George Papandreou said at a news conference in Greece’s second-largest city of Thessaloniki.
He said Greece is in a constant fight to ensure it can continue paying salaries and pensions, “which we guarantee.”
Papandreou, whose party is trailing the main opposition conservatives in opinion polls, also ruled out early elections. He said he had discussed forming a coalition government with the conservatives, who he said “were not mature enough for it, and still are not”
Debt-crippled Greece urgently needs to keep a program of cutbacks on track to secure the continued flow of international rescue loans — worth (euro) 219 billion ($302.6 billion) — protecting it from a catastrophic bankruptcy.
Over the past 20 months, the Socialist government has cut pensions and salaries while raising taxes and retirement ages. But its efforts to cut back while reviving a fast-contracting economy amid record unemployment have faltered, sparking new market distress.
Finance Minister Evangelos Venizelos said the new property tax will be levied over the next two years and will cost citizens an average of (euro) 4 ($5.53) per square meter (10.76 sq. feet), tapping some (euro) 400 billion ($546 billion) worth of real estate.
Speaking after a three-hour cabinet meeting in Thessaloniki, Venizelos said the new property levy — in addition to public sector reforms announced last week — will make up for lagging revenues this year by providing more than (euro) 2 billion ($2.76 billion), about 1 percent of annual gross domestic product.
“The levy and the reforms are enough for us to pull through, but that also depends on the response of Greek society,” he said. “It will be sufficient for us to achieve our targets.”
Venizelos added that, if the measures work, Greece can expect a 2012 budget deficit of (euro) 17.1 billion, almost 8 percent of GDP and slightly higher than the previously predicted 7.6 percent. For 2012, he said he expected a primary surplus of (euro) 3 billion. The primary surplus does not include the cost of servicing the country’s massive public debt.
He warned, however, that the economy was expected to shrink at an even faster pace than expected, contracting 5.3 percent in 2011.
On Saturday, Papandreou delivered his annual keynote speech on the economy in Thessaloniki, pledging to meet fiscal targets despite the economic slowdown.
As the prime minister spoke, riots raged on the streets outside during an anti-austerity protest by some 25,000 people. Police arrested nine suspected rioters, while nine officers and 10 demonstrators were injured.
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