Greek money running out amid opposition to tax hike

ATHENS Mon Sep 12, 2011 7:49pm EDT

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ATHENS (Reuters) - Greek workers threatened on Monday to sabotage a new property tax decided by the government as a last-ditch effort to please international lenders, ignoring warnings that Athens will run out of cash next month.

The move casts doubt on the government's goal to plug a 2 billion euro hole in its 2011 budget and meet the deficit goals its EU/IMF lenders have set to continue bankrolling the cash-strapped country.

Euro zone policymakers threatened last week to withhold the sixth bailout tranche, of about 8 billion euros ($11 billion), because of the country's repeated fiscal slippages.

The Greek government announced on Sunday a new property tax to make sure it will comply with the terms and qualify for the tranche. The EU's Commissioner for Monetary Affairs, Olli Rehn, welcomed the move, saying it went "a long way" toward meeting the country's targets.

But workers at power utility PPC reacted angrily, vowing to block the tax, which the government plans to collect through electricity bills to make sure citizens will pay quickly.

"PPC is no cowboy and no sheriff to put the gun at the Greek people's head," the company's labor union GENOP/DEH said in a statement.

GENOP officials said they would obstruct the issuing of bills and order PPC employees not to cut the power of customers who refuse to pay the tax.

Energy Minister George Papaconstantinou harshly criticized the workers.

"(The tax) can't be the object of cheap trade union grand-standing," he said in a statement, adding that the union had no say in how the company was run.

GENOP-DEH is seen as one of Greece's toughest unions. In the past, it has held repeated strikes to prevent the government from selling stakes or seeking strategic partners for the company.

Greece already uses PPC bills as a vehicle to collect municipal taxes and the fees of state broadcaster ERT. The state-controlled company has more than 90 percent of the country's retail electricity market.

Tens of thousands of austerity-hit families and companies are already late in paying their power bills. GENOP/DEH estimates consumers' arrears in the hundreds of millions of euros, including 135 million by the government itself. A PPC spokesman declined to comment on the figures.

DEAFENING RESPONSE

Prime Minister George Papandreou urged his ruling socialist party lawmakers to back the tax hike, which will apply in 2011 and 2012 and will cost property owners about 4 euros per square meter per year.

"I am calling on you to deliver a response to silence all those ... who are slandering us, calling us lazy and incompetent," he said in a speech in parliament.

The debt-laden country has cash to operate until next month, the country's deputy Finance Minister said on Monday, confirming previous unofficial comments by Greek officials.

"We have definitely maneuvering space within October," Deputy Finance Minister Filippos Sachinidis said in an interview on television channel Mega, responding to questions how much longer the government will be able to pay wages and pensions.

"We are trying to make sure the state can continue to operate without problems," he added.

Finance ministry data released later on Monday, showing that the budget deficit of the central government widened by an annual 22 percent in the year to August, to 18.10 billion euros ($24.81 billion).

The government attributed the shortfall to a deeper-than-expected recession, seen at more than 5 percent -- the country's third consecutive year of economic contraction.

But the government reiterated it expected the property tax hike and other measures to cover the shortfall by the end of the year. ($1 = 0.729 Euros)

(Additional reporting by Angeliki Koutantou; editing by Ron Askew)

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