Ex-Finance Minister Nikos Christodoulakis Says

Greece’s government should consider reducing the tax on house purchases to spur real-estate development and bolster economic growth, former finance minister Nikos Christodoulakis said.

“Large parts of Greece depend almost exclusively on the construction of housing,” Christodoulakis said in an interview in London yesterday. “The construction of housing is the locomotive of quick growth.”

The Greek economy is in its first recession since 1993 and Prime Minister George Papandreouhas raised taxes, cut wages and reduced spending as part of conditions imposed by the European Union and International Monetary Fund for 110 billion euros ($153 billion) in loans. The economy is expected to shrink about 4 percent this year and 2.6 percent next year, according to estimates from the Greek Finance Ministry.

“Greece is facing quite a few problems,” Christodoulakis said in a speech at an event at the London School of Economics organized by the college’s Hellenic Observatory. “Actually, it has sunk in a Bermuda triangle.” He also said that Greece faces “a mild recession next year.”

The former minister of economy and finance said the deficit and debt levels the government now faces were due to “a one-off fiscal catastrophe, not a systemic problem in Greece.” As a result, authorities should target boosting growth just as much as they’re targeting lowering debt levels and increasing tax- collection efficiency, he said.

Growth Policies

The three ways authorities should spur growth in the short term would be to increase public investment, privatize and sell state enterprises, and provide incentives for real-estate development, he said. The latter “is the quickest way for Greece to recover,” Christodoulakis said.

“If such measures, to some extent, are successful and they change the pattern of recession, then you may see a very dramatic improvement in Greek indebtedness,” he said. “The crisis in Greece can be faced, but in order to have viable solutions we need not to only concentrate on reducing debt and collecting revenues, but at the same time, with similar priority, we have to think how growth can return to Greece.”

State revenue next year will be aided by a planned increase in the so-called objective values for real estate, Finance Minister George Papaconstantinou said on July 5. Taxes on real- estate transactions in Greece are based on the government’s assessment of the property’s value, which considers the area and the amenities, rather than the actual market value, which is generally higher.

By: Scott Hamilton

From: Bloomberg.com

http://www.bloomberg.com/news/2010-10-22/greece-must-spur-building-to-escape-bermuda-triangle-ex-minister-says.html

News from New York Real Estate

Brazil Enjoying a Growing Number of Potential Housing Buyers

Real Estate Collapse Spells Havoc in Dubai