Tax on tourists ditched by abandoned holiday isles

The Balearic Islands off Spain's Mediterranean coast are ditching an environmental tax on tourists to lure back visitors, a step that could allow Mallorca, Menorca and Ibiza to benefit from the German row with Italy.

The conservative new president of the Balearic region, Jaume Matas, promised last week to bury the controversial tax in October - the earliest feasible date - to cheers of approval from the islands' powerful tourism moguls, who blamed it for the downturn in visitor numbers.

The previous coalition of socialists and greens introduced the "ecotax" on hotel guests, of around €1 - about 70p - per night per head in 2001 in a bold attempt to counter the ravages caused by decades of wildcat tourist development. The measure was bitterly disputed from the start and set beach towels aflap throughout Europe, especially in Germany, where the tabloid newspaper Bild mounted a furious campaign to have it abolished.

With the Germans now more angered by Italy, where they have been called "arrogant, hyper-nationalistic blonds", the Balearics' tourism minister, Joan Flaquer, is flying to Germany tomorrow to market his islands. After Gerhard Schröder cancelled his holiday in Italy, Mr Matas said he would be "proud" for the Chancellor to come to the Balearics instead.

Jose Maria Aznar's conservative government in Madrid declared the ecotax unconstitutional, because it imposed an additional burden on hoteliers already paying VAT, and threatened to sue the regional government. Hoteliers complained that the tax put visitors off, not so much by the cost, but by conveying the image throughout Europe that the holiday resorts were nothing more than a litter-strewn, concrete jungle.

But supporters said the tax was already proving a success, and argued that visitors would accept it if revenues were used to clean up the environment. More than €60m is expected to be raised by the end of the summer.

The outgoing socialist tourism minister, Celesti Colomar, said the downturn in Spanish tourism proved that the cheap beach formula was now saturated and northern European holidaymakers found better offers elsewhere. "We can no longer compete by cutting costs, only by improving quality," he said.