THESSALONIKI, Greece (AP) — Greece's cash-strapped government said Sunday that it would impose a new property tax on top of existing austerity measures in order to combat a revenue shortfall.
The government also decided, in a symbolic move aimed at a public angry at politicians, to dock a month's pay from all elected central and local government officials.
Finance Minister Evangelos Venizelos said the tax will be levied over the next two years and will cost citizens an average of euro4 ($5.53) per square meter (10.76 sq. feet).
Debt-crippled Greece urgently needs to keep a program of cutbacks on track to secure the continued flow of international rescue loans — worth euro219 billion ($302.6 billion) — protecting it from catastrophic bankruptcy.
Over the past 20 months, the Socialist government has cut pensions and salaries while raising taxes and retirement ages. But its efforts to cut back while reviving a fast-contracting economy amid record unemployment have faltered, sparking new market distress.
Speaking after a three-hour cabinet meeting in Greece's second-largest city of Thessaloniki, Venizelos said the new property levy — in addition to public sector reforms announced last week — will make up for lagging revenues this year by providing more than euro2 billion ($2.76 billion), about 1 percent of annual gross domestic product.
Venizelos added that top Greek officials from the head of state to senior ministry executives will lose one month's pay.
"The levy and the reforms are enough for us to pull through, but that also depends on the response of Greek society," he said. "It will be sufficient for us to achieve our targets."
Venizelos added that, if the measures work, Greece can expect a 2012 budget deficit of euro17.1 billion, about 8 percent of GDP, higher than the previously predicted 7.6 percent.
He warned, however, that the economy was expected to shrink at an even faster pace than expected, contracting 5.3 percent in 2011.
On Saturday, Prime Minister George Papandreou, in a keynote speech on the economy in Thessaloniki, pledged to meet fiscal targets despite the economic slowdown.
As the prime minister spoke, riots raged on the streets outside during an anti-austerity protest by some 25,000 people. Police arrested nine suspected rioters, while nine officers and 10 demonstrators were injured.
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Demetris Nellas contributed from Athens.