PASOK’s massive spending spree
Prime Minister Costas Simitis yesterday unveiled a massive package of subsidies, tax breaks and wage increases that is estimated to cost 2.36 billion drachmas and could have a decisive effect on the next elections. The measures include slashing the tax on farmers’ fuel to cheaper cars for all and incentives for business investments. The «social package,» as the government calls it, suggests that the ruling PASOK party is pulling out all the stops to catch up with the conservative New Democracy party, which has been leading by about 8 percent in recent opinion polls. But Simitis, speaking after a Cabinet meeting, stressed that the measures would not upset the country’s finances, an argument that the opposition is expected to concentrate on. «We insist on a policy of increasing investments,» Simitis said. «Our main target is to develop the Greek periphery and bring it into convergence with the developed regions of the EU,» he added. «We also insist on a stable fiscal policy… We insist on a just incomes policy.» Simitis stressed that the measures did not signal that the government would give in to every group’s demands. «We do not agree with steamrolling demands by organized interests for indiscriminate increases which do not correspond with their contribution to productivity.» The package, excluding public sector wage increases, is worth 1.7 billion euros, Simitis said. With this, he said, «we exceed average social spending in the European Union. We will achieve convergence.» He noted that unemployment in the second quarter of 2003 had dropped to 8.9 percent, from 9.6 percent in the same period last year, the lowest it has been in a decade. «We believe that supporting the income of the weakest classes, offering economic and social support to the Greek family, improving living conditions in the countryside, and helping small and medium-sized businesses will spur development and the ever greater well-being of Greek citizens,» Simitis said. «Greeks’ available income… exceeds that in five other European countries,» he added. «Convergence appears to be coming more quickly than we expected, with regard to Greeks’ available income.» From January 1, 2004, pensions will be increased by 30 euros, so that the lowest monthly pension will be 200 euros. Also from January 1, tax on farmers’ diesel will be slashed from 245 euros per ton to 21 euros per ton. Coffee shops and other small stores in villages with less than 1,000 residents (excluding those in tourist areas) whose annual profit is below 10,000 euros will not be taxed. Also, professionals such as hospital doctors will be paid more to serve in remote or mountainous regions. For the lowest-income pensioners, who receive the EKAS bonus, this will be raised to 140 euros from the current 110 euros, which means that the lowest pensions, with EKAS, will rise to 552 euros (or 188,000 drachmas). This will affect some 380,000 pensioners. People with disabilities will get a 30-euro raise per month in 2004 and, from 2004 to 2008 a raise of 110 euros. Also, some 120,000 people will get housing subsidies. Unemployment benefits will be increased by 10 percent from January 1, so that they are 60 percent of the wage of an unskilled laborer. The unemployed will also get a 50 percent increase in the rent subsidies that workers and pensioners get. Jobless people moving to another region to work will get a 50 percent raise on their rent subsidy for two years. The State and local authorities will hire 25,000 people on a part-time basis. In a bid to help women join or rejoin the labor force, their employers’ social security contributions will be subsidized for one year, as will the contributions for mothers of two or more children. Contributions will also be subsidized for women temporarily replacing employees on pregnancy leave. Women working as farmers will be relieved of having to pay social security contributions for one year after the birth of their second child. Families whose children are studying in another city will get 1,000 euros per student per year, as long as the family’s income is below 30,000 euros, their home is smaller than 200 square meters and their child does well in his or her studies. Families with two unemployed parents (or one single parent) will get a one-off 150-euro subsidy for stationery for schoolchildren. From the beginning of the year, civil servants and public sector employees will get higher wages and an increase in bonuses for postgraduate degrees. Also, pensions will be increased.