Greece - to increase tax on tobacco and alcohol..

January 11, 2010 - Athens - The Greece government said Friday, January 8th that it would increase taxes on tobacco and alcohol in order to raise an additional 1 billion euros (1.45 billion USD) in revenue to rescue its economy and avert bankruptcy risks. (Greece Threatens Bankruptcy, And the Euro Zone by Megan McArdle, The Atlantic, 12/8/2009).

The Finance Ministry said the increase will be implemented immediately for alcohol sales, while cigarette prices will go up on January 12. Under the new changes, tax on a packet of cigarettes will increase from 57.5 percent to 70 percent, immediately affecting Europe's heaviest smoking nation. The new prices would mean a packet of cigarettes, which is currently priced at 3.20 euros (4.65 USD), will cost 3.61 euros (5.24 USD). A Finance Ministry statement said a 20-per-cent tax increase will also be applied in alcoholic beverages.

The announcement coincided with the end of a three-day mission by European Union (EU) officials to Athens to ensure the Greek government follows through on tougher measures to reduce the ballooning deficit. Financial experts say Greek finances are in an alarming state, with the public debt estimated at 12.7 percent of Gross Domestic Product (GDP) in 2009, compared with an EU upper limit of just 3 percent. Its total public debt is 113 percent of total Greek output for 2009 and is set to rise further.

EU officials, accompanied by representatives from the European Central Bank, focused on how Athens plans to improve on its poor competitiveness, which has made the country one of the worst places in the world to do business.

"EU officials are asking us to cut spending as much as possible," Finance Minister Giorgos Papacontantinou told Greek television, adding that "a country that borrows 50-60 billion euros a year has to think of the markets." He said he was not pleased with Greece's image abroad, adding that "it is easy to lose credibility and difficult to gain it back."

"At the table of finance ministers of the European Union, I feel very uncomfortable because I am obliged to defend an image that does no credit to my country," said Papaconstantinou.

On Thursday, the Spanish EU presidency warned Athens it could not expect a bail-out by the rest of the bloc.

A team of EU officials grilled the Greeks as to how and when the government will deregulate labour markets and slash red tape, calling for the details to be clearly outlined in the Growth and Stability Programme to be submitted to Brussels at the end of the month.

Papaconstantinou said the Socialist government's programme to reduce the deficit includes promoting belt-tightening in public finances, taxation and budget drafting.
The Socialists, who won national elections in October, are battling to apply tough fiscal measures needed to restore market confidence.

The government has said it will push through economic reforms, such as introducing changes to the ailing pension system, tax hikes and spending cuts that will slash the deficit by 10 billion euros (14.4 billion dollars) in 2010.

Economics Minister Louka Katseli said the government's programme planned to get the country through the crisis within three years. Government forecasts foresee the public deficit down to 8.7 per cent of GDP this year and then to 3 per cent by 2012.

Reference: Debt-ridden Greece increases tax on tobacco, alcohol, German news agency dpa, EarthTimes, 1/8/2010.

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(Hellenic Republic)

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