December 1, 2014 / 1:17 PM / 5 years ago

Greece offers to raise value added tax to appease lenders

A Greek national flag flutters in the wind at the Plaka district in Athens November 7, 2014. REUTERS/Alkis Konstantinidis

ATHENS (Reuters) - Greece has offered to raise value-added tax for hotels in an effort to appease EU/IMF lenders and wrap up a bailout review that has held up its plan to quit the unpopular aid programme, government officials said on Monday.

Talks between the two sides broke down in Paris last week, with Athens disputing the lenders’ stance that Greece faces a budget shortfall next year unless it takes additional austerity measures. Athens is running out of time for a deal on the review by a Dec. 8 deadline, raising doubts about whether it can exit its bailout by the end of the year as planned.

Over the weekend, Athens made the concession on VAT and offered to discuss pension reforms in a bid to convince lenders that it will meet its target for an almost balanced budget next year, finance and labour ministry officials aid.

“We have sent a document in which we elaborated on our arguments, providing data,” said a senior official from the co-ruling Socialist PASOK party.

The head of a body representing the tourist industry - which accounts for about a fifth of Greece’s economy - called the plan to raise VAT from 6.5 percent to 13 percent for hotels “economic suicide”.

In addition to raising VAT on hotels, the government has also offered to freeze minimum pensions in 2016 and 2017, the PASOK official and a labour ministry official said. It is also willing to discuss gradually increasing the required level of social security payments needed to qualify for a pension to 20 years from 15 years for Greeks born after 1975 and preventing full pension payouts to anyone who retires before the age of 62.

The response of EU/IMF lenders could come as early as Monday, finance ministry officials said. The lenders say Greece’s 2015 budget has a shortfall of over 2 billion euros because they dispute Athens’ predictions on projected tax revenues next year and revenues expected from a new plan to allow payment of tax arrears over 100 instalments.

Prime Minister Antonis Samaras has staked his political survival on ending the bailout early. He needs opposition support to survive a presidential election vote in February and would be forced to call early elections if he fails.

Writing by Deepa Babington; Editing by Robin Pomeroy

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