Margin for more gov’t support

The government is preparing another round of extraordinary measures, ahead of the elections, with Finance Ministry executives invoking the leeway offered by the reduction in natural gas rates to around 65 euros per megawatt-hour today, from €120/MWh in the budget estimate.

At the same time, the government is also preparing announcements for more permanent measures, as – according to Finance Minister Christos Staikouras – the economy and budget revenues are doing better than forecasts, ensuring higher revenues.

“It seems that a fiscal space is starting to be created in 2023,” Staikouras said on Skai TV on Monday morning.

Any new temporary measures are expected to be decided and announced at the end of February. If the low fuel prices persist, ministry officials note that the €600 million the budget has provided for subsidizing electricity rates, or part of them, will not be needed, so the specific amount could be allocated for temporary measures. However, it is currently too early to predict the course of energy prices for the coming months.

The temporary and targeted measures, indicatively, include an “Easter handout,” along the lines of the corresponding Christmas handout, according to scenarios circulating, which could cost €300 million.

Staikouras also referred on Monday to the possible extension of the reduced value-added tax on food service, tourism and transport, which expires at the end of June, saying that it will cost €250 million by the end of the year.

At this stage, ministry officials characterize as the first priority of the government the support against inflation, especially in food. “The focus has shifted to food,” Staikouras said, compared to energy, which was the main source of concern in the past.

Still, any announcements are expected to tread the limits of what is tolerated by the markets, so as not to provoke their reaction, with a rise in interest rates and exclusion from investment grade. That is why the budget execution data is expected first, in order to document the non-deviation from the goal of achieving the primary surplus. “There are still great uncertainties,” warned Staikouras.