Installment support measures with a view to the European decisions in May

Of Tasos Dasopoulos

The storm of negative developments from the war in Ukraine, both in the field of energy and in the field of food, completely changed the climate in yesterday’s Eurogroup, regarding the plans for the 2022 and 2023 budgets.

The reiteration yesterday of Lagarde’s position in the Eurozone Council of Ministers that monetary policy has exhausted its limits and now the energy crisis and the general effects of the war, must face bold fiscal measures, was a catalyst.

Both the Commissioner for Economic Affairs, Mr. Paolo Gentiloni, and the President of the Eurogroup, Mr. Pascal Donahue, spoke about the need to review the Commission’s guidelines, which were published a few days earlier.

In the joint statement of the finance ministers, a step back is already taken in terms of the restrictions imposed by the directives of the Commission for expenditures in the heavily indebted countries (Greece, Italy, Spain, Portugal) especially in the pure directive to present a reduction assessment of their debt. The announcement by the finance ministers stressed that “in particular, in the direction of maintaining debt sustainability, for the Member States with high public debt, we agree that the start of a gradual reduction of their debt would be necessary, if conditions allow.”

The first data presented yesterday by both the ECB and the Commission on the forecast for the course of energy and food prices were extremely worrying. Nevertheless, it was decided to reassess the situation in May.

Until then, the Commission will have about a quarter to gather the necessary data to revise its forecast for the course of the European economy. Preliminary estimates want eurozone growth to slow by at least 1% and annual inflation to exceed 5%.

What are we waiting for in May

In Athens, meanwhile, there is a package of measures in place to support households and businesses, which is adapted to the new conditions created by the war in Ukraine, but within current budgetary margins.

This is an increase in the subsidy for March of electricity and gas tariffs, to households and businesses, with special care for even higher subsidies in the most energy-intensive units.

The “accuracy check” will also include the one-off aid to financially vulnerable households and the “smart measure”, which is set to mitigate the effects of continued liquid fuel price increases.

In April, the increased subsidies to households and businesses are expected to be repeated and now, we will be waiting for the decisions to be taken in Brussels, which will provide the necessary budgetary space, to continue the support against the effects of accuracy.

In other words, over-indebted countries such as Greece should have, in addition to the cash reserve and the budget margin, continue to make expenditures for subsidies.

If the decisions that will be taken in Commission and Eurogroup are the expected ones, they will be the “machine god” that will give these margins to continue in Greece, the support measures even after April.

This is because, at the end of next month, due to the continuous price increases in energy, the account reserves are expected to be exhausted from the revenues of the polluting rights and now, the subsidies, if they continue, will be financed from the budget.

So if fiscal flexibility is not extended or another similar measure is not found for 2022, then together with Greece and Italy and Spain and Portugal, they will start instead of reducing, increasing their deficits and debts, to a crisis period.