Greece coalition to soften austerity measures

Greece's new coalition government said Saturday it will seek to repeal some taxes, halt layoffs and extend by two years the deadlines for tough austerity measures imposed under its international bailout agreement.

Seeks to renegotiate certain terms of the EU loan agreement

Greece's new coalition government said Saturday it will seek to repeal some taxes, halt layoffs and extend by two years the deadlines for tough austerity measures imposed under its international bailout agreement.

The policy statement issued by the three-party coalition came as the country's new Prime Minister Antonis Samaras successfully underwent eye surgery and his finance minister, Vassilis Rapanos, remained hospitalized after collapsing Friday.

"The general aim is no more cuts to salaries and pensions, no more taxes," the statement said, adding that it would not carry out any public sector layoffs.

Samaras, whose conservative New Democracy party came first in June 17 elections but did not win enough votes to govern alone, heads a government that includes his party's long-time socialist rivals, PASOK, and the small Democratic Left party.

The creation of a government following two inconclusive national elections ended weeks of political uncertainty that had led to fears of Greece being forced out of Europe's joint currency. Such an event could have dragged down other financially troubled European countries along with the continent's economy.

While pledging to stick to the country's bailout agreement with other European countries and the International Monetary Fund, all three parties had said they would seek to renegotiate certain terms of the loan agreement.

Greece is mired in the fifth year of a deep recession, and has seen unemployment spiral to above 22 per cent. Widespread anger with rapidly falling living standards led to a massive increase in support for anti-bailout parties in the last two elections.

The new government will aim to extend by at least two years the deadlines for it to impose tough fiscal reforms "to support demand, development [and] employment," it said.

"This way the final fiscal target can be achieved without further cuts to salaries and pensions or the public investment program, but through curbing waste and the targeted fighting of corruption, tax evasion" and the black economy.

Restoring collective wage agreements

The statement said it would seek to reduce consumer tax on the restaurant industry and for agriculture and extend one-year unemployment benefit by another year.

It will also seek to extend unemployment benefit to the self-employed who have lost their businesses and gradually increase the tax-free income limit to European averages.

The new coalition government said it would seek to restore collective wage agreements "to the level defined by European social law" and review cuts to the minimum wage, which had been slashed by 22 per cent earlier this year to about C580 [$727 US] a month as part of negotiations for Greece's second bailout package.

The government will also aim to replace the numerous property taxes currently in place with a single tax.

Debt inspectors from the European Commission, European Central Bank and IMF are due to return to the Greek capital Athens Monday to review the country's fiscal situation and resume talks that had been put on hold during the country's nearly two-month political deadlock.

Whether the new government can deliver on its renegotiating pledges will depend on how they are viewed by their international creditors. Germany, the largest single contributor to Greece's bailout, has repeatedly said Athens must stick to its austerity targets.

The policy statement was issued shortly after Samaras underwent surgery to repair a detached retina. Separately, Rapanos, the newly appointed finance minister, was still being treated in a private hospital after being rushed there Friday complaining of nausea, intense abdominal pain, dizziness and weakness.

A hospital statement Saturday said Rapanos had been submitted to tests, the results of which were "very satisfactory," and that his condition was "stable and improving". It was unclear how long he would remain hospitalized.

Rapanos, who was named to the post Thursday, has not been sworn in to office yet. His swearing in ceremony had been scheduled for Friday evening, but was postponed due to his illness.

Samaras faces his first test to his pledges to renegotiate some of the bailout terms next week, when he is due to go to Brussels for a European Union summit on June 28-29.