The first priority for the financial staff is the extension of the reduced VAT in food service and transport in the second half of the year, as the intervention ends in June 2022 based on the budget, said the Minister of Finance, Christos Staikouras, today speaking on ERT Public Radio.
“An additional package of support for Greek society will be announced within the week, most likely, as the prime minister announced at last week’s cabinet meeting,” he stressed.
Mr. Staikouras estimated that there is no negative sign in the Greek economy in 2022. He reminded that for the first quarter of the year has already been subsidized with one billion electricity and gas, while this week the bill to reduce ENFIA property tax to 350 million euros per year on a permanent basis is coming to Parliament, as well as provisions to reduce production costs in the agricultural sector. Also, the heating allowance has increased significantly by 90 million this year, which now amounts to a total of 174 million euros.
“These policies will be complemented by a support package that we are launching in the near future,” he said, leaving open the possibility of interventions in fuel, saying that “interventions are coming to things that burden the citizen today.”
He also left open the possibility of refunds – as financial support – to specific social groups of additional revenues from fuel taxation, noting that “our policies are based on the budgetary space that exists or is created and aims to help the most vulnerable households” and therefore “the policies to be announced will move in this direction.”
“Announcements will be made during the week. There is a sequence of events that must be taken into account. There was the Summit that followed the cabinet. There is the budget execution, the Eurogroup meeting today and the Ecofin meeting tomorrow. With method, seriousness and timely reflexes, we support the Greek society”, he intervened and admitted that the specific interventions do not cover the total burden of the Greek household. “No Member State alone can cover this whole unprecedented energy crisis. But we are doing the best we can because we have to keep both society and the economy afloat.” He did not want to give more details about the upcoming “high prices check”, in view of Easter, and referred to the statements of the prime minister.
Difficult balancing act
Mr. Staikouras reminded that “the main scenario we were running in Europe was to slightly reduce the price of gas in the second quarter of the year and to remain at these levels in the second half of the year. Today, the corresponding estimate at European level is that gas will remain at a higher price throughout the year, while the ECB revises inflation from 2% to 2.5% to over 5%. So the estimates are that we will have higher costs in our daily lives this year “.
He made special reference to the fact that Greece is in a state of enhanced supervision, emphasizing that our country is not in an investment grade, while it has a sustainable debt that is the highest in Europe. “Given this, we must continue to help households and businesses in a difficult situation, where their income is indeed severely affected, but we must not forget three other priorities that we have.
The first is to extend the reduced VAT to food service and transportation also for the second half of the year – an intervention that ended in June 2022 based on the budget. This means that we must have 250 million euros available.
Second challenge, in 2023 we want to find a budget space of around 2.1 to 2.2 billion euros to make permanent the abolition of the solidarity contribution for all citizens and the reduction of insurance contributions by 3 percentage points. A third challenge, if the price of electricity and gas remains high throughout the year, is likely that the Energy Transition Fund currently used to subsidize part of the increase in energy costs will outstrip its resources, which means that the budget must have additional resources to help households and businesses,” he explained.
Inflation and speculation
Asked about the phenomena of speculation, the Minister of Economy clarified that speculation is hit internationally and that is why the initiatives taken by the Prime Minister are in this direction. “That is, in the direction of imposing a gas ceiling. Such a ceiling is being requested by the Greek government and will be discussed at next week’s Summit, essentially means that extreme fluctuations in gas prices will be reduced. This will have a direct impact on prices in the daily life of the citizen, which will help the Member States to be able, through their policies, to cover a more significant percentage of the costs incurred by the citizens,” he clarified.
On inflation, he said that “at the moment, the effect will be rather a braking of an increased growth rate of 2022. That is, there will be an effect on growth but it will not be such that the sign becomes negative, with the current data. The dynamics of the Greek economy still exist.”
According to Mr. Staikouras, there is a possibility of an impact on tourism revenues, which is a key pillar, “not so much from tourists coming from Russia and Ukraine because the amounts from these two countries were not spectacular, but because of high inflation. in a Europe that “gnaws” on the available incomes of European citizens “.
How much will the war in Ukraine cost?
Regarding the cost that the Greek economy will have to pay for the war in Ukraine, Mr. Staikouras said that it is very difficult to make any assessment. “We do not know how long the war will last and what will happen to gas imports from Russia. “Any extreme move will have a direct impact on energy costs in Europe.”
“In the beginning the bill was not so big, the estimates were that the health crisis would last less and the impact on the budget would be milder. The effects of the war on trade do not seem to be particularly significant, but that does mean that there are no problems. The second part of the impact is the growing uncertainty and the general decline in confidence in security, with the result that we are seeing an increase in countries’ borrowing costs. Among others, Greece, which is not in the investment stage.
The third area that is most important is inflation, since because of both the war and the increased imports from Russia there will be a significant impact on inflation, reaching 7.2% in February. The growth rates in all categories, except energy, are at this rate or even lower. Inflation in Energy in Europe was over 32% at the same time, a very high cost for the Greek and the European citizen, in his daily life,” said Mr. Staikouras.
“With current estimates, the impact on growth seems to be between 0.5% and 1% this year. And there are budgetary costs at European level: € 1.2 billion in aid to Ukraine, aid to Ukrainian refugees, defense spending and aid from the Member States – we also hope for Europe to reduce the households and businesses “, said – among others – the Minister of Finance.
