Tax rises hit Greece as EU meets on debt crisis

[March 15, 2010]  ATHENS, Greece (AP) -- A wave of new tax hikes hit Greece on Monday, raising the cost of consumer goods despite recession and high unemployment, as European Union finance ministers gathered in Brussels to discuss the country's debt crisis.

The center-left government has increased the main sales tax from 19 to 21 percent, as part of a euro16 billion ($22 billion) austerity package intended to cut the budget deficit by almost a third this year.

The tax hike raised the cost of fuel and most consumer goods and services, although many retailers have said they will try to minimize the effect on shelf prices.

Central Athens greengrocer Vangelis Tangalos said the sales tax increase would further damage weak sales.

"We're already 30 to 40 percent down," he said. "Now with the increase there will be even more of an effect."

Greece will present the first results of its austerity measures at the EU ministerial meetings Monday and Tuesday, and says it is looking for political rather than financial backing to pull through a crisis that has hammered Europe's common currency and alarmed global markets.

Both Athens and Berlin have dismissed media reports that the finance ministers would decide to extend financial aid to Greece. As Europe's largest economy, Germany would be deeply involved in any bailout, and has strongly resisted the idea.

EU officials said Saturday the union has developed a set of options to help Greece, but that Athens would have to arrange for possible loan guarantees with each individual government.

Greece's finance ministry says the austerity program, which also involves civil service wage cuts and freezes on hirings and pensions, "appears sufficient" to meet budget saving targets.

The cutbacks have angered unions, which responded with strikes and demonstrations that were marred by extensive riots. Opinion polls show the public is increasingly unwilling to brook the measures.

While one in two Greeks agreed that the austerity package was "generally in the right direction" to help government finances, 42 percent disagreed, according to a survey published in Sunday's Ethnos newspaper. Nearly 66 percent said the cutbacks were unfair.

A poll in the Sunday Eleftherotypia newspaper found that 51 percent of respondents were prepared to participate in labor action against retirement age increases and cuts in wages and pensions.

State power corporation workers will be on strike Tuesday and Wednesday, while petrol station owners, state hospital nurses and teachers are also planning walkouts this week.

[Associated Press]

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