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European Union

Greece's Austerity Measures: Lowering the Minimum Tax Threshold and Implementing a Solidarity Tax

Strategic Insights

— 1 min read

Finance Minister Evangelos Venizelos unveiled a range of measures designed to plug a €5.5bn shortfall in Greece's 2011 budget, including lowering the minimum tax threshold to €8,000 and introducing a one-off solidarity income tax on the entire population. The measures aim to meet the €6.4bn cuts for 2011, part of the €28bn cuts over five years required by the European Union and International Monetary Fund. However, economists and analysts are calling for an immediate restructuring of Greek debt, citing the country's inability to service its €330bn public debt burden.

Key Takeaways:

  • The minimum tax threshold in Greece will be lowered from €12,000 to €8,000 to meet the austerity programme set by the European Union and International Monetary Fund.
  • A one-off solidarity income tax will be imposed on the entire population, with a means-tested rate ranging from 1% to 5%.
  • Members of parliament and top officials will be required to pay the top rate of the solidarity income tax.
  • The self-employed will also be subject to a minimum tax requirement.
  • The Greek parliament will vote on the measures on Tuesday.
  • The IMF and EU have threatened to withhold €12bn of international aid unless the package is passed.
  • Economists and analysts are calling for an immediate restructuring of Greek debt due to the country's inability to service its €330bn public debt burden.
  • The European Central Bank's Jean-Claude Trichet has warned that the threat level to financial stability in the eurozone remains high.

Statistics:

  • €5.5bn: the shortfall in Greece's 2011 budget that the measures aim to plug.
  • €6.4bn: the cuts required by the European Union and International Monetary Fund for 2011.
  • €28bn: the total cuts required over five years.
  • €330bn: Greece's public debt burden.
  • €12bn: the international aid that the IMF and EU have threatened to withhold unless the package is passed.
  • 2011: the year in which Greece aims to meet the €6.4bn cuts.
  • 2012: the year in which a new financial assistance package could cover Greek obligations.

Sources:

  • "EU welcomes Greek austerity plans, but doubts remain" (the Telegraph, no date)
  • "European Union and International Monetary Fund" ( Financial Times, no date)
  • Alastair Winter, Daniel Stewart (no date)
  • Barclays Capital (no date)
  • "Warning lights remain on for euro zone" (Reuters, Wednesday, June 2011)

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