Need for a new supplementary budget
Τhe fiscal cost of subsidizing electricity bills could skyrocket up to 300 million euros per month, which in practice requires adjustment to the state budget, both the current one and that of 2023.
The natural gas rates on the Amsterdam stock exchange and the wholesale electricity price on the Greek energy exchange will determine any additional support measures to overcome this difficult winter, the PM’s announcements at the Thessaloniki International Fair, but also the content of the 2023 budget, the drafting of which has already begun.
The government’s initial projections that subsidies of €3 billion, of which €850 million would be covered by the budget (and the rest by the Energy Transition Fund), would suffice for the second half of 2022 have already been proven wrong from the very first month of the new electricity subsidy mechanism.
The jump in gas rates to the region of €200 per megawatt-hour – double what was predicted when the permanent electricity subsidy mechanism was designed – brought the wholesale price of electricity in July above €340/MWh, an all-time high.
If these levels hold – suppliers’ forecasts point to even higher prices in August – the fiscal cost of subsidizing electricity could exceed €1.5 billion by the end of the year. Such a development obviously narrows the scope for additional support measures ahead of a tough winter.
It is highly likely there will be a second supplementary budget for this year to secure the cash for subsidizing power bills, as the resources set aside by the first supplementary budget will not suffice.
However, even in the event of a new increase in public spending to cover the power hikes and any additional support measures required to get through this winter, it is not certain that the primary deficit will be affected, thanks to the course of tax revenues. The excess of €3.6 billion may be due to temporary reasons (postponed collection of road tax 2022, early ENFIA collection etc), but it also comes from factors with permanent features such as the rise in declared incomes and the very large increase in prices while consumption stays strong.
