Alogoskoufis warns about social security ‘time bomb’

Economy and Finance Minister Giorgos Alogoskoufis confirmed yesterday that income taxes will be reduced gradually, beginning in 2007, and warned that a reform of the social security system must take place sooner rather than later. Speaking at a conference organized by the NGO Citizens for the Future, Alogoskoufis said that next year the tax-exempt ceiling will be raised to 12,000 euros, from the current 11,000, and that the main tax rate will be reduced within two years to 25 percent from 30 percent. The maximum rate for annual incomes above 50,000 euros will also be gradually reduced to 35 percent, from 40 percent currently. Alogoskoufis did not refer to an earlier proposal to institute a flat 25 percent rate. On the social security issue, Alogoskoufis essentially confirmed that the government is treating it like a hot potato to be dealt with preferably, along with the resulting political fallout, by another government. He repeated that the present government is «promoting dialogue» and is «studying all aspects of the issue.» it was the first time, however, that he was he so explicit in his warnings: He called social security a «ticking time bomb which we all expect to blow up at some moment.» «It will happen in 10, 15, 20 years, nobody knows at present exactly when. However, if we do not take a timely initiative to defuse this bomb and turn social security from an explosive issue into an opportunity for this country, we will have a problem. Thus, the dialogue must advance in 2006,» Alogoskoufis said. The minister said that the three main pillars of his economic policy are tax reform, and the law providing incentives to private capital for investment and public-private partnerships (PPPs) whereby private capital will be used for a series of infrastructure projects. Alogoskoufis also added that he intends to submit a few bills to keep the economy running more smoothly. One will concern the development of idle state property, the second will reorganize the way EU aid, through the Community Support Framework, flows into the economy, and the third will set up a fiscal inspectors’ body, probably on the model of the French «inspecteurs des finances» to keep state spending under tight control.

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