The new risks to the economy

Of Tasos Dasopoulos

There are multiple risks for Greece, the developments that will determine the prices of fuel and food, but also the change of monetary policy by the ECB, during the summer.

Attempts to de-escalate oil prices through US pressure on Saudi Arabia and other OPEC members to increase production have had little success. The increase of production by 600,000 barrels per day was decided on Thursday. However, the international price of crude fell from $ 122 but not below $ 116, sending a message of new appreciation to liquid fuels. For Europe in particular, things are getting worse as the oil embargo on Russia continues.

In the case of natural gas, the shutdown of Gazprom, first in Bulgaria and Poland, and then in Finland, the Netherlands and Denmark, although seemingly faced by alternative providers, has created new uncertainty about the adequacy of fuel in the EU. uncertain despite the cyclical decline of recent days).

Greece is enduring the consequences of the developments under the pressure of the high oil prices that are increasing every day and the prices for gasoline and diesel. At the same time, it is under pressure from one of the highest electricity prices in the EU, with the price of a megawatt hour at 235.18 euros. The problem is expected to be alleviated by the 3.2 billion retroactive intervention that will be implemented in July. However, the government, and in particular the financial staff, is pushing for additional measures and for liquid fuels, at a time when the budget margins are now narrow.

The same goes for a number of basic food items, which change price almost every week. Not even for this phenomenon, there are easy easy solutions.

Risk of stagnant inflation

The danger posed by international developments, especially for Greece, is the maintenance of high inflation after the end of 2023 and possibly for 2024 as many analysts predict. High inflation will slow growth in both Europe and Greece combined with marginal growth or even recession, will make strong gossip a reality. on stagnant inflation.

All this, while Greece has a clear opportunity from the Community funds amounting to approximately 51 billion euros, from the Recovery Fund and the new NSRF, to recover the losses of the memoranda and to return to a trajectory of sustainable development. such a scenario, but admit that the period in which we will see a decline in prices is still unclear as even international organizations such as the Commission, the IMF and the ECB are constantly changing – for the worse – their forecasts for growth and inflation

The increase in interest rates

An unfavorable certainty for the next period, we will have the start of the process of raising interest rates by the ECB, in order to reduce inflationary pressures. For Greece, this development will have the direct effect of increasing the cost of borrowing by commercial banks, which will slow down some of the investments, which are now a key component of Greek GDP. At the same time, it will hit consumption, as interest rates on both mortgage and consumer loans will increase.

On the inflation front, the delay in raising interest rates relative to the Fed dropped the euro against the dollar close to 1: 1 to return to 1.07 to 1 in recent days, ie lower than 1.1 : 1 which was at the beginning of the year. This will be a condition for accelerating inflation in Europe.

At the budget level, Athens should be prepared to see its bond yields even higher at 4% or even 5%, which will make it difficult to refinance the debt.