UPDATE 1-Greece votes on unpopular tax, public seethes Reuters - 27/09/2011 10:46:40
* Ruling party lawmakers set to approve new property tax
* IMF/EU/ECB inspectors expected in Athens Wednesday
* Vote scheduled for about 1600 GMT
* Finmin to hold 0900 GMT news conference
* Buses, metro, tax collectors on strike
(Adds source saying inspectors should return to Athens on Wednesday)
By Ingrid Melander and Harry Papachristou
ATHENS, Sept 27 (Reuters) -
Greek lawmakers are expected to approve a deeply unpopular property tax on Tuesday to open the way for the return of international lending inspectors and the release of vital aid despite growing anger sweeping the austerity-hit nation.
The vote is an important first test of the government's ability to push through a new wave of belt-tightening announced last week to persuade the International Monetary Fund and the European Union that Athens deserves an 8-billion-euro ($11 billion) loan that it needs to avoid bankruptcy next month.
Bus drivers and metro workers launched a strike against the austerity moves and tax collectors began a 48-hour stoppage. Activists vowed to step up demonstrations in the ancient capital, where protesters clashed with riot police in June.
Having grown increasingly impatient at the slow pace of reforms, a "troika" team from the IMF, EU and European Central Bank abruptly quit Greece this month after a row, prompting the Athens government to unveil an intensified strategy.
After Finance Minister Evangelos Venizelos held talks with troika officials at a weekend IMF meeting in Washington, sources close to the troika said the team was likely to return to Greece this week to restart their operations.
"Yes, the review should normally resume Wednesday," one source told Reuters. Greek officials have said the inspectors want written assurances from Athens before they return that it is totally committed to implementing the new austerity package.
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The IMF and EU team has criticised Athens for dragging its feet on cutting the size of the bloated public sector because it has made little progress on a promise to cut the 730,000 public workforce by a fifth and sell off loss-making state firms.
The government has also failed to end rampant tax evasion, while a third year of economic contraction has eroded budget revenues and undermined Greece's goal of cutting the budget deficit to 7.6 percent of annual output this year.
"THE MOMENT OF TRUTH"
Its slow pace of implementation coupled with European leaders' inability to erect a wider safety net has stoked fears that a Greek default could bring down other debt-laden euro zone states like Italy and Spain and trigger a new global recession.
"We are at the moment of truth for Greece," European Commission spokesman for economic affairs Amadeu Altafaj said on Monday. "This is the last chance to avoid the collapse of the Greek economy. The criteria must be fully met in order to allocate the funds."
U.S. President Barack Obama also criticised euro zone leaders on Monday, saying the crisis was "scaring the world" and urging them to deal with it more swiftly.
In its new austerity package to convince the troika, the government said it would cut public salaries and pensions, put 30,000 public contractors on notice and extended the property levy until 2014, two more years than planned.
Activists plan to step up anti-austerity demonstrations in the central Syntagma Square of Athens, where riot police clashed with protesters on Sunday, firing tear gas in the first such unrest after a summer lull.
When lawmakers voted on an earlier austerity package at the end of June, more than 100 people were injured in two days of running battles with police on the square in front of parliament which has become the epicentre for opposition to the cuts.
Socialist Prime Minister George Papandreou, whose party has suffered a sharp drop in support since June and is well behind the conservative opposition in polls, will be in Germany for a meeting with Chancellor Angela Merkel during the vote on the tax bill, which is expected at around 1600 GMT.
Papandreou will discuss reforms ahead of another key parliamentary vote in Germany on Thursday meant to give more powers to the EU's EFSF bailout fund. German voters need to be convinced about the reasons for the Greek bailout.
MORE AUSTERITY MISERY
Unhappy at imposing more pain on voters hit by tax hikes and spending cuts over the past 18 months, ruling Socialist party lawmakers are nevertheless expected to toe the line to prevent a Greek default that would send tremors through the global system.
"I believe that the government is not going to face serious problems in parliament. (Ruling party) PASOK lawmakers are going to vote," said Costas Panagopoulos, at ALCO pollsters.
"They are unhappy, but it is very difficult for anyone to say no because it would probably cause the government to break down," he added.
The government's majority has fallen to 154 out of parliament's 300 seats after one deputy was expelled from the party for voting against a previous austerity package in June.
This time, no PASOK lawmaker has threatened to vote against the tax, and political analysts also expect them to vote for other austerity steps as they emerge in coming weeks.
"It is different now, because they have realised that things are even worse," Panagopoulos said. The fact that many ruling party lawmakers did not expect to be re-elected if snap elections were held now also helped close party ranks, he said.
Some 92 percent of Greeks believe the austerity measures are unfair and 72 percent believe they will not work, according to a GPO poll published by Mega TV on Monday. Twenty-three percent said they would not pay the new taxes.
The poll also showed 78 percent of Greeks think the country should stay in the single currency zone while 55 percent saw a risk that Greece would default on its 350-billion-euro debt mountain in the next couple of months.