Economic policy stays on course

The ruling conservatives are expected to push ahead with their current economic policy despite Sunday’s defeat in the European parliamentary elections, as the government works on ways to solve Greece’s mounting fiscal woes. The government’s handling of the international crisis and its domestic economic solutions were one of the key issues in Sunday’s ballot that resulted in the Socialists beating the conservatives by more than 4 percent. Greece’s high public debt and wide budget deficit has left the government with little room to woo back voters. Economy and Finance Minister Yiannis Papathanassiou left for Brussels yesterday to attend a Eurogroup and Ecofin meeting, where he was expected to reiterate Greece’s committment to lowering the budget deficit to below 3 percent of gross domestic product (GDP) by 2010. Greece is expected to show a budget deficit of 5.1 percent of GDP this year, up from 5 percent in 2008, according to the European Commission. Sources said Papathanassiou is likely to unveil a series of tax hikes at the end of June aimed at helping support budget revenues hurt by the slowing economy. Among the steps being examined is a fuel tax hike, an increase in tobacco tax as well as the introduction of a levy on prepaid phone cards. The government already hit drinkers and smokers in February when it upped taxes on tobacco and alcoholic drinks in a bid to put an extra 350 million euros in the state coffers. As part of efforts to catch tax evaders, the ministry is also likely to broaden the range of deductible expenses offered. Taxpayers who keep receipts from amounts spent at restaurants, hairdressers and gymnasiums etc, can claim up to 40 percent of these expenses against their taxable income, with a maximum allowable limit of 8,000 euros. The ministry is considering broadening the range of deductible receipts to stamp out tax evasion in businesses, such as car mechanics and consultants, among others.