untitled design

Because the Ministry of Finance sees a difficult winter

By Tasos Dasopoulos

The implementation of the unfavorable scenario for the energy sufficiency of the European Union since the autumn, with Russia having almost stopped the supply of natural gas to Europe since the middle of the summer, has filled for the Ministry of Finance the “vacuum” that was missing to make the macroeconomic scenario until the end of 2023.

Of the effects concerning Greece, apart from the general pan-European directive to reduce the consumption of natural gas by 15%, the most basic is the price of natural gas. In the Ministry of Finance they are now convinced that it will be difficult to return to the 100 euros per thermal megawatt hour that was just two months ago, from the 203-209 it has reached today. The high prices of natural gas also keep the price of electricity high, which worries the Ministry of Finance and the government more. This given that it is now certain that more than the 2 billion euros that had been calculated will be needed to continue absorbing up to 90% of the readjustment clause, until the end of the year.

The money to strengthen the effort to curb electricity price hikes will come from two sides: The first is the good course of revenues and tourism. The second is the restart of the lignite units. The operation of these units will increase the revenue of the fund collected from the auctions of polluting rights, which has been contributing to electricity subsidies since last November.

The increase in interest rates

The second problem that directly concerns Greece is the increase in interest rates by the European Central Bank, which will be faster than expected. Due to the timing and the rally of Euro inflation, which reached 9.6% in June, the ECB was forced, in its first move to contain the price level, to raise its interest rates by 0.50% instead of 0 .25% as expected.

Everyone is waiting for the second interest rate hike in September to confirm whether the ECB will follow the FED’s practice, even if delayed. In other words, if we will have a faster increase in the key intervening Euro interest rates to contain inflation.

The Ministry of Finance is not so much concerned about the impact that the increase in the cost of money will have on public borrowing, as it is about the financing of the private sector. The rise in the cost of money will delay, if not cancel, some investments. The solution that will be given will come through low-interest loans of 12.7 billion euros from the Recovery Fund, for private investments, from companies that have a banking profile. For smaller businesses, the funding shortfall is expected to be covered by intensive use of NSRF 2021-2027 resources.

The threat of recession in the Eurozone

Perhaps the most important and difficult problem to deal with, is the significant slowdown of the large economies of the Eurozone, which will create a vortex that threatens to drag down even smaller countries such as Greece. Coupled with persistently high inflation, the phenomenon threatens to wipe out the gains from the tax cuts of the past two years and the 9% increases in basic pay since the start of the year.

The solutions that have fallen on the table of the Ministry of Finance are: Immediately, a new, braver support for the economically vulnerable, the payment of retroactive payments for pensioners from the supplementary benefits and gifts in accordance with the relevant decision of the Council of State, the acceleration of the next increase in the minimum wage in the first quarter of 2023, but also the abolition of the solidarity levy for the public and private sectors.

Source: Capital

You may also like

Get the latest

Stay Informed: Get the Latest Updates and Insights

 

Most popular