THESSALONIKI, Greece - Greece's cash-strapped government said Sunday that it would impose a new property tax on top of existing austerity measures in order to combat a revenue shortfall.
Finance Minister Evangelos Venizelos said the tax will be levied over the next two years and will cost citizens an average of €4 ($5.53) per square meter (10.76 sq. feet).
Debt-crippled Greece urgently needs to keep a program of cutbacks on track to secure the continued flow of international rescue loans — worth €219 billion ($302.6 billion) — protecting it from catastrophic bankruptcy.
Over the past 20 months, the Socialist government has cut pensions and salaries while raising taxes and retirement ages. But its efforts to cut back while reviving a fast-contracting economy amid record unemployment have faltered, sparking new market distress.
Speaking after a three-hour cabinet meeting in Greece's second-largest city of Thessaloniki, Venizelos said the new property levy — in addition to public sector reforms announced last week — will make up for lagging revenues this year.
"The levy and the reforms are enough for us to pull through, but that also depends on the response of Greek society," he said. "It will be sufficient for us to achieve our targets."
Venizelos added that, if the measures work, Greece can expect a 2012 budget deficit of €17.1 billion, about 8 percent of GDP, higher than the previously predicted 7.6 percent.
He warned, however, that the economy was expected to shrink at an even faster pace than expected, contracting 5.3 percent in 2011.
On Saturday, Prime Minister George Papandreou, in a keynote speech on the economy in Thessaloniki, pledged to meet fiscal targets despite the economic slowdown.
As the prime minister spoke, riots raged on the streets outside during an anti-austerity protest by some 25,000 people. Police arrested nine suspected rioters, while nine officers and 10 demonstrators were injured.
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