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Greece's Rebounding Economy During Pandemic Bringing Tax Cuts

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Commuters make their way on central Monastiraki square, in Athens, Thursday, June 9, 2021. (Photo by Eurokinissi/Vassilis Rempapis)

ATHENS -- An unexpected rise in Greece's economy battered by lockdowns aimed at slowing the COVID-19 pandemic – which didn't work – has led Prime Minister Kyriakos Mitsotakis to say his New Democracy government will cut taxes and provide relief for rising prices.

He made the announcement at the Thessaloniki International Fair (TIF) where the country's leaders typically make rosy prognostications and reveal their plans for the economy.

Mitsotakis said Greece's Gross Domestic Product (GDP) would grow 5.9 percent, far more than the previously optimistic prediction of 3.5 percent, as tourism and the reopening stores and eased health restrictions saw people buying again.

In a report, the Bloomberg News Agency said the economy will come back at a rate not seen in 20 years, or since Greece got into the European Union, although the measure was partly against the near-shutdown pandemic performance.

Mitsotakis' government in 2020 poured 17.5 billion euros ($20.69 billion) into subsidies for workers laid off during lockdowns and for their businesses to keep them afloat, keeping most employed.

With another 32 billion euros ($37.83 billion) in European Union COVID-19 loans and grants – it wasn't said where that went – Greece is getting back on good footing after having slowly accelerated an economic push when three international bailouts of 326 billion euros ($385.44 billion) ended Aug. 20, 2018.

Mitsotakis said a bump in second quarter revenues, with the summer tourism season expected to bring another surge, would allow him to bring 3.4 billion euros ($4.02 billion) in tax cuts and measures to offset jumping prices.

He said helping entrepreneurs typically held down by Greece's clientelist system of preferring patronage and political friends is one of his priorities to further spark an unlikely economic comeback, along with promoting green and digital investments.

Greece’s economy expanded 3.4 percent in the second quarter compared with the January-March period, driven by strong investments, luxury hotel chains seeking expansion in the country and foreign companies being lured after stymied by the former ruling anti-business Radical Left SYRIZA.

Output rose 16.2 percent in the second quarter compared with the same period in the previous year and even taking into account the deleterious effects of lockdowns, quarterly GDP is higher than before the pandemic, the report added.

Measures to help businesses include a lowering of the corporate tax rate from 24 to 22 percent and a 30 percent cut in income tax for companies that go ahead with mergers and acquisitions.

Price rise buffers for food and power costs caused by higher international prices for transportation, raw materials and energy include reducing the sales tax until June 2022 for coffee, transport, non-alcoholic drinks, cinemas, gyms, dance schools and tourism packages. 

During the fourth quarter, households will receive a subsidy for the first 300 kilowatt hours consumed to cover most of the expected price hike in power bills.

“We are creating a shield of protection against certain price increases that are already occurring worldwide,” Mitsotakis said.