With energy costs catching “fire” again and price hikes threatening to spread from fuels and electricity to the entire economy, Friday’s Eurogroup in Dublin is being called upon to raise a barrier against the new wave of high prices.
Under the presidency of Kyriakos Pierrakakis, the council of eurozone finance ministers is being called upon to assess the impact of the new energy crisis on households and businesses and to explore the room for governments to respond to the resurgence of inflation.
The focus will be on the latest economic developments and the risk that the energy turmoil could take on broader dimensions, triggering a new barrage of price increases in products and services, further burdening consumers.
The Greek side is entering the discussion having already raised the issue of the possibilities for new interventions. Minister of National Economy and Finance Kyriakos Pierrakakis sent a message yesterday that there are fiscal reserves to support society against the effects of the rapid rise in energy costs.
According to information, in the “piggy bank” there is currently an amount in the range of 130 to 150 million euros, with the economic staff keeping its cards close to its chest regarding the next moves.
The final decisions will depend to a large extent on the course of international oil and natural gas prices and above all on whether the rise proves temporary or takes on a longer duration.
As the minister pointed out, to date approximately 800 million euros have been allocated to curb the effects of the waves of energy-driven high prices, while several of the interventions remain in force, including the subsidy of 10 cents per liter on diesel.
The new lines of defense were at the center of yesterday’s meeting at the Maximos Mansion under the Prime Minister, with the government examining the room for additional interventions in response to the rise in energy costs.
On the fuels front, the main option remains the extension or strengthening of the existing diesel subsidy, so that part of the increase in international prices can be absorbed and the burden at the pump can be limited. At the same time, the possibility of a new Fuel Pass is being examined, provided prices remain at high levels for a longer period.
At the same time, interventions in electricity and changes to the heating allowance are being examined, with the aim of broadening the protection of households against the rise in energy costs. Under scrutiny is the increase in the amount of the allowance, as well as its adjustment to the new conditions, so that the support responds more to consumers’ increased needs and the higher cost of heating.
The allowance today ranges from 100 to 800 euros and for areas of the country with very low temperatures it can reach as much as 1,200 euros. At the same time, interventions in the cost of electricity are not ruled out, with the aim of limiting the effects of the rise in wholesale prices on electricity bills.
VAT reduction?
Of particular interest, ahead of tomorrow’s council, is the statement by German Economy Minister Katherina Reiche that it would be reasonable to temporarily reduce VAT on fuels from 19% to 7%, in order to help consumers cope with the sharp increase in fuel prices.
“This could ease the burden where it is immediately felt: at the gas station, and it would be implemented immediately after the introduction of the measure”, Reiche said, speaking on the sidelines of the meeting of G20 energy ministers in Houston, Texas.
The government of Chancellor Friedrich Merz is trying to deal with historically high prices at gas stations ahead of the regional elections this weekend, the result of which could increase pressure on the chancellor to resign.
Reiche stated, however, that imposing an upper limit on fuel prices—that is, a cap—would be the wrong approach and also expressed her opposition to the imposition of a windfall tax on energy companies.