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Greeks find tax hike on a traditional liquor hard to swallow

Amid the financial crisis, there's one EU-imposed austerity measure that's causing particular angst among Greek citizens: a tax hike on one of the country's favorite traditional liquors. Greeks are worried that raising taxes on tsipouro, a powerful, clear type of brandy, will hurt the industry and farmers. Hari Sreenivasan reports.

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  • JUDY WOODRUFF:

    Now we head to Greece, a country that's been inundated by a surge of refugees washing up on its shores.

    At the same time, Greece is still reeling from a financial crisis. The government has been forced to cut spending and raise revenue. Many citizens aren't happy, especially with a tax hike on a beloved national drink.

    Hari Sreenivasan has that story.

  • HARI SREENIVASAN:

    In a barn full of pungent fumes, Demetrios Papafigos is distilling, applying the techniques of monks who created this quintessentially Greek elixir in the 14th century.

    This alcohol time capsule, in the central town of Tyrnavos, is at the heart of the latest tax dispute in a country that's broke and under intense pressure to extract as much revenue as possible from its citizens. Brewed from fermented grape skins, it's a powerful, clear type of brandy, similar to Italy's grappa, called tsipouro.

    DEMETRIOS PAPAFIGOS, Licensed Tsipouro home Brewer (through interpreter): Tsipouro provides the grape growers with supplementary income. Without it, the vineyards would have to be uprooted. The vineyards wouldn't survive otherwise.

    They have only survived thanks to production of tsipouro, because, during difficult times, when bad weather destroyed the crop, we could even distill damaged grapes and make some money.

  • HARI SREENIVASAN:

    Fellow grape farmers from this close-knit community have joined Papafigos for lunch, washed down, of course, with tsipouro.

    If the European Union gets its way, the tsipouro makers will have to pay double the alcohol excise duty, which is currently applied. At the moment, the liquor enjoys a low taxation rate because it's considered to be a traditional speciality, not one that's mass produced.

    And Antonis Giamelides, the technical director of the local cooperative, is deeply concerned.

  • ANTONIS GIAMELIDES, Technical Director, Tyrnavos Tsipouro Cooperative:

    It's a crazy situation. We don't know what will happen tomorrow. If the excise taxes go up at that level, then it will destroy all the wine production in Greece, because these people will not be producing any grapes anymore, because it will not be profitable.

  • HARI SREENIVASAN:

    At the moment, there's no sign as to whether Greece plans to obey the European Union. But, if it does, the tax increase will be implemented within the next month or so.

    The European Union argues tsipouro doesn't warrant the lower rate, and claims small home brewers are cheating the system by supplying restaurants on an industrial scale. But the Greeks are worried that manufacturers in neighboring Albania and Bulgaria will flood the market with black market tsipouro.

    Silas Rapsaniotis, president of the cooperative, warns that it won't just be the farmers who will suffer.

  • SILAS RAPSANIOTIS, President, Tyrnavos Tsipouro Cooperative (through interpreter):

    There will be no profit for any of the businesses. The industry will close down. It will be a huge catastrophe here. It will stop being the poor man's drink. It won't be drunk at lunchtime, and it will have a negative knock-on effect for other connected businesses. There will be shops such as restaurants that will close down.

  • HARI SREENIVASAN:

    In one of many working-class districts in Athens, the Greek capital, this teetotaling vegetarian correspondent went in search through meat and fish markets for the Hellenic equivalent of moonshine.

    Do you think people will drink less if the tax goes up?

  • COSTAS KARAGIANNIS, Cafe Owner, Athens Central Market:

    Of course.

  • HARI SREENIVASAN:

    Costas Karagiannis runs a lunch joint in the city's main market, where tsipouro is a staple.

  • COSTAS KARAGIANNIS:

    The customers will have to pay, more expensive. And this time in Greece, it's too difficult to pay anything.

  • HARI SREENIVASAN:

    One of the reasons a tax on tsipouro strikes such a nerve is because it's not the fancy stuff. It's a commoner's drink. People have it with meat and cheese in the middle of the day. It's part of the Greek circle of life.

    At this pavement cafe not far from the market, these pensioners were making the most of the circle of life at 11:00 in the morning.

  • MAN (through interpreter):

    We'd rather give up food than tsipouro. Tsipouro is drunk when the child is born, at its baptism, at its wedding, and even at his funeral.

  • MAN (through interpreter):

    For us, tsipouro is the best drink of all.

  • HARI SREENIVASAN:

    At the booze shop next door, the owner was quickly decanting four pints of the home brew for a taverna owner who was expecting a rush at lunchtime. The rough stuff is cheaper than bottled tsipouro, but even so, this man doesn't think his customers can take the extra tax hit.

  • MAN:

    I think all restaurants are going to close.

  • HARI SREENIVASAN:

    Why?

  • MAN:

    Because the prices are too high, about the tax, yes.

  • HARI SREENIVASAN:

    We asked the Greek Finance Ministry for an interview, but no one was available. However, the country's former chief tax inspector, Harry Theocharis, did talk to us, and was sympathetic to the grape farmers.

    HARRY THEOCHARIS, Member of Parliament, Potami Party: Any tax at this point in time which is a drag on growth is a problem, because Greece's problem is jobs. That's our number one problem, and we need to do anything in our power in order to create more investment and more jobs.

  • HARI SREENIVASAN:

    Do you think that a tax like this will create an incentive for a larger black market in this?

  • HARRY THEOCHARIS:

    It's possible. We already do have a big black market, due to the way that we license those small producers.

  • HARI SREENIVASAN:

    How crucial is this to the overall financial health of the country?

  • HARRY THEOCHARIS:

    This is a very small, small issue. I think it starts with the commission taking us to court in order to have a level, fair playing field, so this has nothing to do with the actual austerity. It is not a measure that is done because of that.

  • HARI SREENIVASAN:

    And that last answer gives hope to the people of Tyrnavos. Under their interpretation of European rules, Greece can refuse to implement the tax increase. They just hope that, after giving in to Europe over so many financial issues, the government in Athens will be prepared to fight for tsipouro.

  • ANTONIS GIAMELIDES:

    That's our tradition. That's our kind of living, right? So, if we lose that, we're losing everything.

  • HARI SREENIVASAN:

    In Greece, tsipouro is known as the tear of the land. But will this part of the land soon be in tears? The key question for the government is whether collecting extra taxes makes good short-term sense, or is bad for the economy in the long term.

    For the PBS NewsHour, Hari Sreenivasan, Athens, Greece.

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