Bankers said that the government’s decision to slap a 7-percent tax on interest earned on repurchase agreements (repos) beginning next year is unlikely to lead to the demise of this popular investment. Greek savers found refuge in repos as interest rates collapsed after Greece joined the eurozone in January 2001 and the stock market continued to slide. Effectively short-term deposits collateralized by a government bond, repos offered secure and higher returns than the typical savings deposit. Finance Minister Nikos Christodoulakis, who came to the job in a cabinet reshuffle last month, gave no reason for the decision to tax repos when he announced it after an inner cabinet meeting yesterday. The move….will not turn off the public because compared to bank deposits they will still have a competitive edge in terms of yield, NovaBank treasurer Nick Sikiaridis told Reuters. Interest earned on Greek bank deposits is currently taxed at a higher 15-percent rate, eating away at the net returns savers earn. Still, the planned tax on repos is likely to put the brakes on the growth they witnessed this year. The growth of repos as a parking place for savers is unlikely to be sustainable next year because of the tax. But how much it brakes growth will also depend on how other markets perform, Sikiaridis said. Greek savers, including businesses keen to secure a positive real return on cash, piled into repos this year, parking a total of 31.4 billion euros in these instruments, based on August statistics by the Bank of Greece. Year-on-year, their rate of growth slowed to 56.2 percent in August from 113.8 percent in May. In contrast, Greek businesses and households had liquidity amounting to 93.3 billion euros parked in bank deposits in August, with the biggest portion, 74.9 billion, in euros. In the beginning, I don’t expect the impact to be large. As repos are taxed at 15 percent in other European countries, there is still an edge in Greek repos, said a senior bond trader at a private bank. If they bring it (the tax) up to par the impact will be felt more. This type of money will start looking at alternatives including corporate and government paper as well as equities with dividend yield, the trader said. Following the European Central Bank’s (ECB) latest round of monetary loosening, repos in Greece offer a tax-free yield close to the ECB’s 3.25-percent reference rate. Compared with a headline inflation rate of 2.8 percent in October, they still offer a positive real interest rate. Previewing the 2002 Budget, due to be tabled in Parliament on November 21, Christodoulakis said the fiscal surplus for this year has been revised downwards to 0.1 percent of GDP from 0.5 percent, and to 0.8 percent from 1.3 percent next year.