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Greek MPs approve deeply unpopular property tax ‘with a heavy heart’

Levy collected through electricity bills is approved hours before prime minister Papandreou holds crucial talks in Berlin

A new property tax, seen as the most unpopular austerity measure yet in Greece, has been approved by the 300-seat parliament as striking transport workers brought the country to a standstill in a rising tide of protest against further belt-tightening.

The levy, which will be collected through electricity bills, was passed with all 154 MPs from the ruling party voting in favour, though many said they had cast ballots with a “heavy heart”.

Faced with the option of seeing the debt-stricken country default, socialists endorsed the tax, which is expected to raise about €2bn (£1.75bn) – enough to close a gaping budget black hole and bring the deficit down to a targeted €17.5bn.

The passage of the law came hours before the prime minister, George Papandreou, was to hold crucial talks in Berlin with Germany’s chancellor, Angela Merkel. It was seen as the first of several hurdles the government will have to overcome in the coming weeks as it struggles to implement a new round of unpopular reforms in exchange for rescue loans from the European Union and the International Monetary Fund.

“I will vote for it because such fiscal adjustment measures are the only way for Greece to go forward,” a Pasok MP, Kostas Kartalis, said. “But a lot of my family and friends are opposed to such policies.”

The duty, expected to cost the average household €1,000-€1,500 a year, will apply to anyone with property in Greece. Failure to pay will result in electricity supplies being cut off. Although well received by the country’s creditors, it is seen as a desperate measure for desperate times.

Yesterday, as the finance minister, Evangelos Venizelos, outlined further austerity policies announced by the government last week, hundreds of ministry employees, themselves the victims of cuts, protested outside the building after trying to stop him talking to the media.

A GPO poll this week showed that 92% of Greeks believe the measures are unfair and 72% do not believe they will work after 18 months of budget targets being missed despite wage and pension cuts, tax increases and price rises.

“I know these measures are very tough … I am acutely aware of the hardship and the anguish such sacrifices have caused for Greeks,” said Venizelos, adding that the measures would save the state €6.5bn – the equivalent of 3% of GDP.

The minister said he had listed the measures in a letter to Greece’s “troika” of international lenders. The letter is believed to be central to troika representatives resuming a review of Greece’s fiscal progress nearly three weeks after they suspended a mission to Athens over missed targets. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds