Greek Prime Minister Antonis Samaras announced cuts on Saturday to unpopular taxes introduced at the height of Greece's debt crisis, in a bid to show that over four years of austerity are finally nearing an end.
Samaras, whose conservative party trails the anti-austerity, radical leftist Syriza party in opinion polls, said a heating oil consumption tax would be cut by 30 percent and a "solidarity tax" would also be reduced.
"This is the year that Greece has started to stand on its own feet," Samaras said in his annual state of the economy speech at a trade fair in the northern city of Thessaloniki, marking the end of the summer break. "It is still wounded, yes. But its wounds are healing and it is looking to the future."
Buoyed by improved investor confidence and signs of economic stabilization, Samaras has pushed EU and IMF lenders to start rolling back austerity demands to help kickstart growth and preserve Greece's fragile political stability.
Greek officials brought up the issue of tax relief at talks in Paris this week with the lenders to review the progress of the bailout, but there was no confirmation that they had agreed to the package. Samaras said details of the tax cuts would be presented in the draft budget when it is announced in October.
He also said he was working on a taxation "road map", in which the top rate of income tax would be cut in stages to 32 percent from 42 percent and the corporate tax rate reduced to 15 percent from 26 percent. A deeply unpopular property tax would also be reduced, he said, without providing any details.
The government on Saturday also confirmed that Greece would show growth in the third quarter, its first quarterly expansion since the start in 2008 of a recession that has wiped out nearly a quarter of its economy.
Hours after Samaras spoke, thousands of public and private sector workers and leftist group PAME members rallied in Thessaloniki to protest against wage cuts and firings.
"These are half-measures that are not enough," said Yiannis Panagopoulos, head of the private sector umbrella union GSEE. "Greek people, workers and pensioners - our jobless fellows are suffering."
Police used teargas against a small group of protesters who tried to break through a cordoned-off area around the trade fair building but there no serious clashes or injuries were reported.
BACK TO GROWTH
Greece is expected to return to marginal growth this year after the six-year recession, which has left more than one in four jobless and reduced household incomes by nearly a third.
It has staged an abrupt turnaround since nearly going bankrupt in 2012 and almost bringing down the euro with it. It remains the euro zone's most indebted nation, with debt forecast to top 177 percent of economic output this year, but it has largely managed to bring its finances back on track and posted a budget surplus before interest payments last year.
In a sign that investor sentiment is improving, Athens returned to bond markets this year with two sales that raised a total of 4.5 billion euros. Another is expected before year's end. But it still faces several hurdles before it can fund itself unaided.
It is expected to need more debt relief, talks on which are expected to start after the latest bailout review and European bank stress tests are completed in the autumn.
There could also be political instability ahead of a presidential election early next year. If Samaras's government fails to secure the support of at least 180 of the 300 lawmakers to push through the appointment of a new president, parliament must be dissolved and a snap election held.
Samaras has the support of only 154 lawmakers in his coalition of Socialists and conservatives, and Syriza has vowed to block the election of a president.
Still, Samaras played down the prospect of early elections, saying support for his coalition was growing.
"The time is approaching for the country to exit the bailout era once and for all and, if an early pre-election campaign starts right now, we will risk losing everything that we have achieved," he said. "It would be political suicide for Greece."
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