Warm summer for inflation

By Tasos Dasopoulos

It remains doubtful whether we have seen the peak of “national” inflation in Greece, after which we should expect a gradual de-escalation, albeit due to the high base of 2021.

From the beginning of the month, the price of natural gas was below 100 euros per megawatt hour (MWh). However, after the restrictions imposed by Russia on the supply of fuel to Germany and Italy and the interruption of the supply to France, we saw a new rally in the price, which yesterday reached 126 euros per thermal megawatt hour. Brent international prices are also close, which during yesterday’s trading were moving above $ 114 a barrel all day.

The picture of the inflation course is completed by the information that has reached the competent Ministries of Finance and Development, that the chains and the individual food stores have already received new price lists with double-digit increases (according to competent sources range from 11% to 23% ) in many basic foods, such as milk, meat, eggs, fresh vegetables and fruits, but also cereals, flour and edible oils. These lists will now be updated on a monthly basis, depending on the course of prices. For these reasons, no one can yet know whether the 1% increase in inflation in June 2021 is capable of slowing down inflation for the current month.

Beyond the rise in inflation, the fact is that businesses and households will continue to be under pressure from high prices. It is characteristic that if the national Consumer Price Index exceeds 8% for this year, as estimated by the OECD for Greece, the double increase by 9% in the lower wages given since the beginning of the year will almost completely disappear.

Support measures

The government is trying to tackle this sharp drop in revenue with the big 3.2 billion euro intervention in electricity, but also the extension of the subsidy for liquid fuels, with more money and a larger perimeter of potential beneficiaries. At the same time, of course, a plan is being worked out to repeat a measure similar to the “accuracy check”, which is expected to be finalized in September. In the same month, it will be decided whether to extend the fuel subsidy for a third quarter, for the period from October until the end of the year.

Directions from Brussels

In September, the directives from the European Commission for the guiding principles of the budgets for 2023 of the Member States and especially those with high debt, such as Greece, will have to be renewed. These decisions are particularly crucial for Greece, as the course and amount of support measures will be judged by the level of prices until the end of 2023. Therefore, the Government wants to know if and to what extent it will be able to extend the intervention. for electricity bills and for 2023 or support should be reduced in order to finance more permanent relief measures, such as the abolition of the solidarity levy and the permanent reduction of 3% of insurance contributions.