Brussels irked by Greek decision to postpone VAT hike for islands

The European Union is not pleased with the Greek government's decision to postpone an increase of the VAT on five islands affected by migration, a senior EU official said on Tuesday, noting the measure was not agreed with Brussels.

According to the official, the measure will only apply until the end of the year. He said the abrupt change meant that alterations had to be made to the bailout program which the board of the European Stability Mechanism will be called to approve on Thursday night.

The official said the decision will only cost the budget 24 million euros, and expressed hope it will not affect a decision by the ESM to disburse Greece's last loan tranche.

Asked whether the pension cuts will apply from 2019 onwards as planned, he said the reductions have been agreed with Greece and it would be “wise” for the Greek government not to start any discussions to change the program.

Prime Minister Alexis Tsipras announced on June 29 the government is freezing a planned VAT hike in Lesvos, Chios, Samos, Kos and Leros, which were due to adopt in July the higher tax rates implemented on the mainland.

The five islands had been exempt from the switch to higher rates that took effect on the other islands in January 2018.