Dear friends, good morning!
Seven hundred and one euros. That is how much the government estimates average disposable income will rise in 2027, based on its new fiscal measures. Or, if you prefer, by 4.6%.
But the energy bill has already started to mount.
About three million households still on green electricity tariffs face average increases of more than 30% in November, while increases at some suppliers reach as much as 76%. The average charge has risen to around 28 cents per kilowatt-hour.
Behind the bill is the wholesale market. On 2 November, the price reached €312 per megawatt-hour, compared with €86 on the same day last year.
But electricity does not stop at the socket. It is used in production, transport and storage, and in the supermarket fridge. And when it gets more expensive, the cost... gets passed along.
Greece’s manufacturing PMI has already fallen to 53.3 in October, recording its weakest rate of growth since May. More significant, though, lies behind the figure. Energy, fuel and transport pushed input cost inflation to its highest level since May. Businesses responded as expected: they raised their selling prices at the fastest pace since June.
In other words, high energy costs are not merely at risk of feeding through into prices. They already are.
And that brings us back to €701.
The government’s challenge for 2027 is not simply to increase incomes. It is to increase real purchasing power. What is an increase in income worth if high prices have already eaten it away? All the more so when an entire economic edifice rests on this assumption.
The draft budget forecasts growth of 2.3%, inflation of 2.6%, investment growth of 7.9% and a 3.9% increase in compensation per employee. But if energy prices continue to climb, the equation begins to creak.
More expensive energy means higher costs for businesses. Higher costs mean pressure on prices. Higher prices mean less real purchasing power and, ultimately, pressure on consumption and growth.
This is not yet a reversal of the budget forecasts. It is, however, a test of one of its key assumptions.
The government itself knows this. The draft budget was submitted, as the Ministry of National Economy and Finance itself says, amid «disruptions in energy markets», with geopolitical tensions affecting international energy markets.
There is, however, a second bill.
If high energy prices persist, the government will face the familiar dilemma: either consumers pay or the state steps in. In the first case, purchasing power is eroded. In the second, the cost is transferred to the budget.
All this is happening in a year when real incomes will inevitably be at the centre of political debate.
So €701 is the government’s forecast. The plug socket will show how much ultimately reaches people’s pockets.