(Bloomberg) -- Greece plans to double its budget backstop for natural disasters linked to climate change by increasing a levy on accommodations, mostly affecting luxury hotel stays, Prime Minister Kyriakos Mitsotakis said.
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“Special reserves will increase from €300 million ($320 million) to €600 million,” as of 2024, Mitsotakis said in an annual speech on economic priorities in Thessaloniki on Saturday, following extreme weather that hit Greece with its biggest forest fires and floods in history this year.
The government will fund the increase by raising an existing hospitality levy by between €1 and €6 per night, he said. Mitsotakis also made it clear that Greece will meet its fiscal targets regardless of the disasters’ economic cost.
Moody’s announced a two-notch lift of Greece’s credit rating on Friday, bringing the country to within one step of investment grade. DBRS Morningstar, Scope Ratings and Rating and Investment Information Inc. have already given Greece investment grade since Mitsotakis won reelection in June, citing the country’s economic performance.
Tourism is driving growth, with a 26% year-on-year increase in arrivals in the first half of 2023 and a 23.9% rise in revenues.
But Greece’s worst flooding ever left 17 dead in September, drowned tens of thousands of animals and destroyed homes, roads, bridges, businesses and farmland. The government says railroad repairs alone will cost more than €150 million.
Storm Daniel flooded about 140,000 hectares, including in the hard-hit Thessaly region in eastern central Greece that’s a major source of dairy, cotton and produce. The region that accounts for about 5% of Greece’s gross domestic product.
Investors and rating firms want to see the government stick to its reform agenda and fiscal discipline that took hold before the Covid-19 pandemic. Mitsotakis has pledged to meet the existing fiscal targets despite the natural disaster economic cost and also presented his plan for the reforms in justice system and health sector.
“I will never put in danger fiscal stability,” he said Saturday.
Mitsotakis also announced:
Ten new measures to fight tax evasion, including that any purchase or sale of homes will have to be done through banks, not cash
Those who rent three or more properties via short-term lease platforms will have to pay value-added tax and all taxes paid by hotels
The end of special taxation on Greek bonds in a bid to make them an alternative for depositors
A 50% cut in the financial transaction tax
(Updates with other announced measures in last paragraph, adds tourism data.)
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