Tax hike on humble Greek drink threatens town’s future

At Statiris Tavern, the patrons' faces are hardened from a life of hard work – truck drivers, builders, and farmers who've just ended their grueling grape harvest.

There's little talk of difficulties at work or the country's financial crisis. This is a place where friends wander in to share a joke, or snack on a plate of fries and octopus with a late afternoon glass of tsipouro, the potent local spirit.

A close relative of the Greek spirit ouzo, tsipouro has become increasingly popular during the recession as an affordable alternative to imported drinks, but is now facing a tax increase under European Union rules that could almost double its price.

Coming on top of a raft of other tax increases the government is planning to pay off debts, the news is a disaster for Tyrnavos, a farming town in central Greece famous for its production of tsipouro (pronounced TSEE-poo-roh).

"If I charge 4 euros for a small bottle of tsipouro and suddenly raise the price to 6 euros, customers will cut back immediately. They have no spare money in their pocket," says Giorgos Tsitsiroulis, who runs the tavern in this town of 20,000 people where many store signs are still hand-painted.

"It will affect the entire area, because it's a product that's entirely local. The grapes are from this area, the wood to fire the stills is local, the labels on the bottle are local, everything."

Similar to Italian grappa or Turkish raki, tsipouro is a clear and powerful spirit that is produced from twice-distilled grape residue. It is made with and without anise flavoring, the addition making the drink turn cloudy when water is added.

The European Union has given Greece two months to double taxes on tsipouro, arguing it does not have the right to keep a reduced duty that is reserved for some traditionally made products. It also wants Athens to crack down on small independent producers who pay a low tax rate that is aimed at helping small producers but is now widely abused for bulk supply to small restaurants nationally.

For branded tsipouro, the tax increase would push up the retail price of a 700ml (0.18 gallon) bottle from roughly 10 euros to 17 euros ($19), equaling the price of whisky and vodka.

Farmers will also feel the effects of many new government budget measures, with bailout lenders demanding an end to cheaper fuel used in agriculture, higher income tax rates, and larger advance payments on annual tax bills for the self-employed.

"It's a double hit for us," said Vagelis Sikalos, manager at the Agricultural Winery Cooperative of Tyrnavos, the region's largest single tsipouro producer.

"It will hit consumption … and result in the decline of this rural area, hurting jobs. A huge part of the population works in vineyards. The crisis in Greece will be magnified in Tyrnavos."

Prime Minister Alexis Tsipras' newly re-elected government is pledging to push through a battery of cost-cutting measures over the next six weeks that will affect farmers, the health service, pension system, and public administration, in exchange for continued bailout loan payouts and rescue money for its troubled banks.

Tsipras, who needs a vote of confidence from the new parliament at midnight Wednesday, has already warned the country of the tough road ahead with budget forecasts this week forecasting another two years recession and unemployment above 25 percent.

Panagiotis Papras, who uses 5 hectares (12 acres) to grow wine grapes, fears the new tax increases could force local farmers to switch from growers to importers.

"Grapes are the raw material. If they go, everything else follows: The winery, the jobs there, all the shops that sell tsipouro in the area. Eighty percent of the grapes grown here are used for alcohol production."

Papras is the last farmer in the region to finish this year's harvest, and is helped by workers from Albania who sit on beer crates snipping grape bunches off the vines – from the local red moschato and white roditis varieties.

"Tsipouro is a poor man's drink. The rich would drink the wine and what was left was used to make tsipouro for everyone else. So to tax it this way is really unbelievable," he said.

Despite its humble origins – the word tsipouro is derived from the Turkish word for grape pomace, dating back to the time of Ottoman rule – the drink is a huge source of pride here and owning a still is a symbol of status.

Elderly residents often enjoy a pre-noon shot with their coffee, and the drink adds a little wobble to some of the town's cyclists.

Patrons at Statiris Tavern keep the tiny bottles coming as they sit by walls decorated with old shipping paraphernalia, religious icons, and two large photographs of the Marxist revolutionary Che Guevara.

Truck driver Constas Parakos insists the town of Tyrnavos will never give up its love for the drink.

"If someone can't afford three carafes, he'll buy two." he said. "Tsipouro will never disappear from Tyrnavos. Elsewhere it might, but not here."

[AP]