By George Georgiopoulos and Renee Maltezou
ATHENS (Reuters) - Greece's Prime Minister Kyriakos Mitsotakis on Saturday announced a tax relief package to boost jobs amidst a downturn caused by the coronavirus pandemic, as well as rise in spending to strengthen the country's defence capabilities.
At his annual economic address in the northern city of Thessaloniki, Mitsotakis said his conservative government will end real estate tax in 26 islands and lower social security charges for workers and employers.
"Our priority cannot be other than safeguarding employment," he said.
Greece's economic recovery has ground to a halt after the outbreak of COVID-19 and measures to combat the pandemic. It slumped at an annual 15.2% clip in the second quarter in the face of the coronavirus shock.
Dependent on tourism, the economy has been hard hit by lockdowns and travel restrictions. So far, government support including furlough schemes has contained the rise in unemployment, which climbed to 18.3% in June, the highest in 16 months.
Government support has helped cushion the blow to the economy. Despite tight finances, fiscal targets for this year and next were waived to enable it to inject liquidity in the economy of around 6.3% of GDP.
But the response has turned primary budget surpluses, which exclude debt servicing outlays, to deficits - estimated to reach 5% to 6% of GDP this year.
Mitsotakis said all unemployment benefits would be extended by two months and terminate the so-called solidarity tax surcharge on incomes for one year in 2021.
He also said that in October the state would return 1.4 billion euros to pensioners, whose income was slashed during the debt crisis of the past decade.
Amid tensions with neighbouring Turkey over energy resources in the eastern Mediterranean region, Mitsotakis said that Greece will boost its armed forces.
He announced the purchase of 18 Dassault-made Rafale fighter jets (PA:AVMD), without providing a figure for the sale, and said that Greece will start the process for the acquisition of four frigates and the upgrade of another four frigates, without disclosing further details.
The country will also purchase new weapons, torpedoes and missiles and revamp its loss-making defence industry. Over the next five years, the armed forces will also hire 15,000 staff, he said.