Page last updated at 16:49 GMT, Wednesday, 24 February 2010

EU takes Greece to court over tax breaks

Euro notes
The EU has put Greece's public finances under close scrutiny

The European Commission says it will take Greece to the EU's top court to recover state aid, which it says violated EU single market rules.

Greece has failed to comply with a 2008 order to claw back state aid granted illegally to hundreds of firms through tax exemptions, the commission says.

In July 2007 the illegal state aid was estimated to be 200m euros (£176m).

The move coincides with a public sector strike in Greece triggered by anger at budget cuts demanded by the EU.

The Greek government has vowed to collect more taxes and crack down on tax evasion as part of a drive to reduce its budget deficit of 12.7% - which is more than four times higher than eurozone rules allow.

Among the sectors that benefited illegally from tax breaks were car manufacturing, energy production, mining, agriculture and fisheries, the commission says.

The case will go to the European Court of Justice in Luxembourg, which rules in disputes between the commission and EU member states, as well as between EU citizens and governments.

The EU Competition Commissioner, Joaquin Almunia, said: "The recovery of illegal aid is about restoring a level playing field in the single market.

"The commission is determined to take all necessary steps to ensure that member states comply with their recovery obligations."

Greek law allowed firms to deduct up to 35% of profits in 2003 and 2004 as tax-exempt income to use for investment and training, the commission says.

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