Greece raises retirement age, cuts pay ahead of strike (2nd Roundup)

Feb 9, 2010, 18:52 GMT

Athens - Greece moved Tuesday to tackle its debt crisis which has shaken global markets and the European Union by pledging tax reforms and increasing the retirement age, ahead of a nationwide strike.

'Our primary duty is to save the economy and to reduce debt while seeking just solutions that protect as much as possible those on lower incomes and the middle class,' said Prime Minister George Papandreou, who is scheduled to meet French President Nicholas Sarkozy in Paris on Wednesday.

Athens is under pressure from EU governments and markets to bring its runaway budget deficit to below 3 per cent by 2012, down from 12.7 per cent in 2009, the euro zone's biggest gap.

A potential default by Athens on billions of euros in public debt could be a serious blow in other countries that also use the euro.

On Thursday, EU leaders will meet in Brussels for a special summit on the economy amid fears that rising debt in Greece, Portugal and other weaker states in the eurozone could undermine a global recovery.

Although Athens has repeatedly said it would not need any financial assistance by the EU, many speculate that the summit come up with some kind of solution for Greece.

Greece's government has committed to a four-year austerity plan which is meant to reign in the massive budget deficit with a plan to raise the average retirement age to 63 from 61 by 2015, and ban early retirement.

Greece's fiscal plan also foresees freezing public-sector hirings and wages and cutting bonuses by 10 per cent, including those of the prime minister and his ministers. It will also apply higher levies on fuel, tobacco and alcohol and plans to raise more money by fighting tax evasion.

Papandreou asked civil servants to accept bonus cuts, saying that they 'must be the first to set and example.'

Under Greece's new tax bill, the government will increase the tax on the top income bracket to 40 per cent and will expand it to include incomes of over 60,000 euros a year, from the current 75,000- euro threshold.

'I believe that our European partners and the markets and Greek citizens are watching the implementation of the programme the government has announced,' Finance Minister George Papaconstantinou said in announcing the draft tax bill.

'They are watching and waiting to see whether Greece will really do what it must ... and that we are proving with our daily actions that things are becoming reality.'

The finance minister also said Greeks must collect receipts in an effort to crack down on tax evasion and said that cash registers will need to be installed everywhere, including kiosks found on every street corner.

'We call on all Greek citizens to help in our effort to battle against tax evasion which is equal to theft,' Papaconstantinou said.

The government said the austere measures would also be applied to Greece's wealthy Greek Orthodox Church, with all property and assets taxed.

However, analysts fear that political resistance to cutbacks and tax hikes will keep Greece from sticking to its plan as unions have threatened to intensify strikes.

Civil servants plan to walk off the job in a nationwide strike Wednesday, shutting state schools, hospitals, tax offices and local government offices.

More than 350 domestic and international flights will be cancelled as civil aviation workers go on strike starting midnight Tuesday at airports across the country.

Private sector workers said they would strike on February 24.

Farmers, meanwhile, have been blocking major roads across the country for the past month to demand subsidies from the government, frequently closing the northern border with Bulgaria and restricting the transportation of goods.

Papandreou has urged the unions to show restraint, saying the country could not afford strikes and blockades.