The Greek government today announced an immediate 20% increase in tobacco and alcohol taxes as it fended off EU pressure for drastic action to fix the crippling budget deficit.
It is believed that experts from the European Commission and European Central Bank had demanded to know 'in detail, when and how' the necessary measures would be taken during talks with Greek leaders before leaving today.
Finance Minister Georges Papaconstantinou announced the tax increases as he reaffirmed the need for the country to establish financial credibility in Europe where Greece's troubles have raised fears over the stability of the euro zone.
Greece, whose public spending deficit rose to 12.7% of output last year and debt to 113% of gross domestic output, has to present its crisis programme to the European Union by the end of the month.
The Greek government is aiming to bring the public deficit to below 3% of GDP, the limit imposed by the euro zone, in 2012. Greece's tobacco and alcohol taxes are among the lowest in Europe.
Announcing the tax increses, Papaconstantinou denied press reports that he plans to increase sales VAT on goods or to end the 14th month salary that most workers get.
The minister acknowledged that the EU pressure was difficult for the government to accept. The EU experts are believed to have demanded that Greece put the emphasis on balancing the budget by 2012 and making the economy more competitive.
Greece's government has said it will get the spending deficit down to 8.7% in 2010 by cutting government spending and a campaign against tax fraud. Pension reforms are to be proposed by April.
Greece will have to endure monthly visits by EU officials from February as part of the tighter surveillance ordered by the country's European partners.
