Greek Finance Minister Presents Austerity Plan To Greek Parliament

06/24/2011 01:50 pm ET | Updated Aug 24, 2011

ATHENS, Greece (AP) -- Greece's finance minister presented details of harsh spending cuts and tax hikes to a parliamentary committee on Friday, after tough negotiations with the country's international creditors.

The measures are to be voted on in parliament next week in two bills -- a euro28 billion ($39.8 billion) midterm austerity plan and an implementation law. They must both pass if Greece is to receive a critical installment of its international bailout loans next month, in time to prevent a potentially disastrous default that could drag down European banks and affect other financially troubled European countries.

The ministry issued the 73-page implementation law Friday evening. It details the creation of a body to handle a euro50 billion ($71.1 billion) privatization drive to 2015 and a raft of tax hikes, including imposing more income tax on those earning small salaries of euro8,000 (around $11,000) a year, a "solidarity tax" on everyone earning above euro12,000 ($17,000) per year.

It also increases taxes on heating fuel for businesses, imposes a limit on civil service hirings to one for every 10 departures, and hikes some consumer taxes and road tax.

"Yesterday was a very unpleasant day for me, because I had to tell bitter truths, and we had to agree on very tough measures, measures which also include the element of injustice and the element of overtaxation," Finance Minister Evangelos Venizelos told the financial affairs committee.

He said he could not rule out having to impose even more measures during his tenure as finance minister, although he and his deputies would try to ensure that would not be necessary.

"We can't keep coming back every so often and ask for corrective measures, but I won't state that I will never introduce more measures while I am finance minister and am handling a crisis," he said. "We ... will make every humanly possible effort to execute the budget and the midterm program without new measures. But the result depends on the state as a whole, the public administration, the whole market, the tax compliance of all citizens."

The austerity bill will be brought to parliament for debate on Monday and Tuesday, with a vote to be held either Tuesday or Wednesday, finance ministry officials said. The implementation law is to be discussed on Wednesday, with a vote expected on Thursday, although the discussion could spill over into Friday, the official said.

Angered by measures that include higher taxes for those earning around the minimum wage, unions have called for a 48-hour general strike next Tuesday and Wednesday, during the parliamentary debate.

Greeks have also faced intermittent power cuts for days as workers at the country's power company continue 48-hour rolling strikes. The company filed a suit in an Athens court Friday asking for the strike to be declared illegal -- a move which, if approved, would force the employees back to work. The court said it would issue a final decision on Monday.

The organization's union objects to the company being privatized as part of an ambitious drive to raise euro50 billion by selling state assets by 2015.

"We are not in a position at the moment to make the choices we would want to make," Venizelos said in his speech in the parliamentary committee.

Despite receiving a euro110 billion package of rescue loans from other European Union countries that use the euro and from the International Monetary Fund last year, Greece has found itself in need of more help as it struggles to meet revenue and cost-cutting targets in the midst of a recession.

The country's international creditors have been discussing a second bailout for the troubled country, and EU leaders meeting in Brussels Thursday night gave their clearest sign yet that Greece will get one.

Venizelos said one of the main issues facing the Greek economy, which is deep in recession, was the lack of growth, and said he would meet with his German counterpart Wolfgang Schaeuble in Berlin to discuss the matter. He did not give a date for his trip.

Derek Gatopoulos in Athens contributed to this report.