Greek Prime Minister George Papandreou underlined his government’s determination to social and economic reform as he wrapped up the five-day debate which saw Parliament pass the 2010 budget.

He also pledged transparency in all the government’s actions, stressing the need to restore the trust of ordinary citizens in the Greek state and the country’s credibility in the eyes of its European partners.

The budget was passed 160 for and 139 against.

The main features of the 2010 budget include the following:

  • On the revenue side it includes:
  • A total increase of 4.5 billion euros in government revenue
  • About 1.2 billion euros of this would come from cracking down on tax evasion and settling taxpayers’ overdue debts
  • An increase in tobacco, alcohol and real estate taxes
  • A one-off corporate tax
  • Reintroduction of a progressive tax on large property holdings, inheritances and bequests
  • Abolition of tax exemptions and a current, flat-rate tax regime for certain professional groups
  • Introduction of capital gains tax and effective taxation of offshore companies

On the spending side it includes:

  • Government spending cuts of 2.3 billion euros
  • 1.4 billion euros of savings by not repeating one-off 2009 payments to settle state hospital debts
  • 457 million euros of savings would come from defence spending cuts
  • A 26 percent decrease in Ministries’ operating costs, in areas such as travel expenses and power bills
  • A freeze on public sector wages above 2,000 euros a month. However, civil servants making less than that amount would receive pay rises above inflation

Speaking after the vote, Prime Minister George Papandreou said the budget was “a contract to reconquer our credibility”

“We shall prove our capacity and determination to change this country, to ourselves and to any foreigner who puts in doubt our will,” he continued.

“Those who seek to downgrade our great institutional reforms regarding the state should ask themselves why our efforts failed in the past,” Papandreou said in his address to MPs.

“We should, all together, prepare a strict timeframe regarding necessary reforms,” Papandreou said.

He went on to cite transparency, a fairer tax system leading to a more equitable redistribution of wealth and reliability as the key principles that would govern the government’s budgets in the future.

Main opposition New Democracy (ND) party leader Antonis Samaras opposed the budget and accused the government of not coming to the House in order to pass “a budget of emergency but of gaining time until you understand where you are.”

According to the ND leader, the effort for stabilising the Greek economy should include measures such as enlarging the tax base instead of suffocating the market with new taxes and the adoption of objective consumption criteria.

Regarding state expenditures, Samaras said that the state should contain the public sector’s extravagance something that could save around 5 billion Euros.

He also said that he waas opposed to any increase in fuel prices.

Samaras also called on the government to “take drastic measures, something you do not do. The markets are punishing you, they are continuously downgrading Greece.”

George Papaconstantinou, the finance minister, has set next year’s budget deficit target at 8.7 per cent of GDP, banking on a mix of spending cuts and revenue-enhancement measures to do the job.

Mr Papaconstantinou said last night: “Fiscal year 2009 is closing and the 2010 fiscal year will be the first in a four-year effort for fiscal stability and growth.”

Additional budget measures will also be included in an triennial Stability and Growth Plan which will be announced in January.
These include:

  • A 10 percent cut in additional, supplemental public sector wages
  • A hiring freeze for permanent public sector jobs in 2010, excluding health and education, and the hiring of one new civil servant for every five retiring from 2011 onwards
  • A one-third reduction of all short-term employment contracts in the public sector in 2010
  • A 10 percent reduction in social security expenditures in 2010
  • A 50 percent cut in board members’ pay at public enterprises in 2010; managers’ pay in state-run firms would be capped and cut by at least 10 percent; no bonuses would be paid to managers of state-controlled banks, and bonuses for private bank managers would be taxed at 90 percent