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New Greek Austerity Measures Tap Cafe Culture

  • Associated Press

Tourists eat at a restaurant-cafe bar in front of the ancient Acropolis hill in central Athens, Greece, May 31, 2016.

Tourists eat at a restaurant-cafe bar in front of the ancient Acropolis hill in central Athens, Greece, May 31, 2016.

Greeks have woken up to a new wave of price hikes that have been demanded in return for more international bailout loans, with the highest increases targeting the main ingredients of the country's cafe culture: Coffee and beer.

Starting Wednesday, Greece's main sales tax rate, or value added tax, went up from 23 to 24 percent. Taxes were also raised on services used heavily by Greeks forced to cut back on leisure activities due to the financial crisis. Charges increased on internet, fixed telephone and pay TV subscriptions.

The measures were approved by parliament before Greece's partners in the 19-country eurozone agreed to unfreeze 10.3 billion euros ($11.5 billion) in bailout funds and begin discussions on easing Athens' debt repayments.

Greece's left-wing government also overhauled pensions and signed up to ambitious budget targets.

Business owners have criticized the latest tax hike, saying it will hit consumption when the country is already reeling from six years of a financial crisis that has seen the economy shrink by a quarter and unemployment swell — the jobless rate is currently around 24 percent.

"The sixth VAT increase in six years and the second in the last 10 months means that our lives from June 1 get more expensive by 437 million euros per year, while each increase acts as a cut to consumption, turnover and state income," said Vasilis Korkidis, head of the Hellenic Confederation of Commerce and Entrepreneurship.

Coffee shop owner Katerina Vagena noted that this was the second hike in consumer tax on coffee in the space of a year. Last year, it was raised a whopping 10 percentage points to 23 percent as part of the country's third international bailout deal.

"The price was already quite high. It's a country where many people are having difficulty paying 3-3.5 euros. So it's become a problem and people have stopped coming for coffee," said Vagena, whose coffee shop in Athens employs five people.

"All we do is pay taxes. They think they get more out of small businesses. But so many businesses were opened by people who were unemployed," she said. "I think a lot of us will go. And we'll join the ranks of the unemployed."

The tax changes will also increase fuel prices.

"The consequences will be negative for the consumer and for us because [people] will surely reduce the amount of gas they use and this will produce a chain reaction," said gas station owner Antonis Stellas.

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