In Greece, new property tax sparks anger

Members of the 'I won't pay' movement stand by a Christmas tree decorated with the power bills with the new emergency property tax during a protest in Thessaloniki, Greece.

Tess Vigeland: If you think belt-tightening in this country has been rough, Greek citizens might beg to differ. The country is in the vice grip of a massive debt crisis. And in order to win European approval for a bailout package, the Greek government has been forced to promise deep cuts in public spending, tax increases and economic reforms -- including an emergency property tax that affects some five million homes.

Marketplace's Stephen Beard has our report from Athens.


Stephen Beard: Anna Maria Piskopani's family is typical. Like many middle class Athenians, they're sitting on a nest egg, a modest property portfolio. They have three small apartments which they rent out.

Anna Maria Piskopani: They're old apartments. They're 40 years old. And the rent is quite cheap. It's €250 each a month. So it's really cheap apartments.

They bring in a total of around $1,000 a month -- a vital source of income for Anna Maria's mother, who's a widow and retired. The family was horrified late last year when the new property tax bill arrived.

Piskopani: You have to pay all of the rent just to pay the property tax.

And that means that many families, like Anna Maria's, have had to dip into their savings to pay the tax.

Piskopani: We're actually terrified because our savings are almost gone.

There was even more reason for alarm. The property tax demand arrived along with the electricity bill -- and a threat: If you don't pay the tax, we'll cut off your power. That threat to millions of property owners caused outrage in the Greek parliament. Lawmaker Liana Kaneli.

Liana Kaneli: Having electricity in your house, it's a right, it's a human right that you can't be deprived of, if you are supposed to be considered as a so-called civilized society.

In fact, the threat of a power cut has been lifted. Power company workers flexed their industrial muscle and refused to disconnect any homes. But the government is pressing on with the property tax -- and economist Aristos Doxiadis says understandably so.

Aristos Doxiadis: The government is resorting to the property taxes because the base is so wide and because it's very difficult to tax evade on the property tax. I mean the property's there, everyone knows it's there.

But former finance minister Stefanos Manos is not a fan of the new revenue-raising measure.

Stefanos Manos: I would abolish this tax. It is a stupid tax.

He says it's stupid because it's levied without any regard for the property owners' ability to pay. It's reckoned that at least half a million Greeks would have to sell their properties in order to pay the tax. And, says Manos, the tax undermines the government's plan to reduce its debt by selling off its own considerable holdings of real estate.

Manos: No one will buy these assets from the state because of this tax. So the government has imposed a tax which has killed the value of its own assets. And that's why I say it's stupid.

Under pressure to comply with the terms of the second bailout, the Greek government doesn't dare to scrap the new tax. Anna Maria Piskopani fears that her family may now be forced to sell the three small apartments and lose their main source of income. She says the property tax is destroying Greece's middle class.

Piskopani: We are very angry. We are feeling there is a huge injustice on us. We're feeling that we're being punished for something and we do not know what it is. And we don't know how it will stop.

But tax payers in richer European countries like Germany say that the Greeks are being punished for government overspending. And they ask: Why should Germans and other Europeans pay for the folly and excesses of Greece?

In Athens, I'm Stephen Beard for Marketplace Money.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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