Greece set to cut chief executives’ pay

Greece on Tuesday cut salaries of chief executives at state-controlled corporations as part of new tax and income measures aimed at reducing the budget deficit and averting an international bail-out.

George Papaconstantinou, finance minister, said chief executives’ salaries would be capped at €5,000 a month ($6,890, £4,390) – the same as cabinet ministers – and their allowances would be reduced.
There will also be a pay freeze and a 10 per cut in allowances that together amount to a 4 per cent pay cut for more than 500,000 public sector workers.

The measures came at a tense moment in Greece with two days of strikes and demonstrations starting on Wednesday by civil service and communist-led unions in protest against the Socialist government’s austerity programme.

Air traffic controllers and transport workers will join the 24-hour walk-out by Adedy, the civil service union on Wednesday, shutting down all flights in and out of Athens international airport, and halting bus and subway services around the capital.

But recent opinion polls show more than two-thirds of Greeks are willing to support the government’s economic programme.

“There is strong popular backing for measures agreed with the European Union,” said Yannis Stournaras, director of IOBE, an Athens economic think-tank. The tax and incomes package was finalised at an emergency cabinet meeting before George Papandreou, prime minister, departed for a special EU summit at which leaders will examine the Greek government’s progress with its economic rescue effort.

“We are in the process of clawing back lost credibility,” Mr Papaconstantinou told the Financial Times.

Greece is anxious to demonstrate its commitment to a three-year stability plan aimed at cutting the budget deficit from 12.7 per cent to 2.8 per cent of gross domestic product and curbing a swollen public debt. The plan has already been tightened in response to pressure from the European Commission and is due to be approved next week by EU finance ministers.

The tax package included an amnesty “along the lines followed by Italy”, the finance minister told the FT, enabling Greeks to repatriate funds held abroad without fear of prosecution for tax evasion.

The government is keen to attract back an estimated €5bn of deposits moved abroad after Greece’s debt crisis began last December, as well as part of an estimated €60bn held by Greeks in bank accounts elsewhere in Europe.

Mr Papaconstantinou also warned of a rigorous crackdown on tax evasion. “There will be intensive electronic cross-checking of all business activity,” he said.

Legislation to increase the excise tax on petrol – a measure demanded by the Commission – was rushed into parliament on Tuesday night.

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