The Greek government has announced a new subsidy package of financial measures aimed at strengthening households and businesses hit by soaring energy prices. The total package amounts to €1.1 billion and covers handouts to specific groups of consumers covering the whole range of fuels including electricity, gas and transport.
Dafnozonara Hydroelectric Power Plant in Aitoloakarnania, Greece. Credit: Terna Energy official website
The Greek government has announced a new package of financial measures aimed at strengthening households and businesses hit by soaring energy prices. The total package amounts to €1.1 billion and covers handouts to specific groups of consumers covering the whole range of fuels including electricity, gas and transport.
However, despite the necessity, it is deemed as going against budgetary discipline and is expected to stifle economic growth.
Since the start of the year, the country has been facing extraordinarily high energy prices which lead to indiscriminate increases in food and goods prices, which in turn gave rise to strong inflationary pressures.
This latest government largesse will affect 3.2 million people and comes on top of €2.5 billion already disbursed as subsidies since last September when the government decided to directly subsidize electricity and gas prices at the consumer level in an effort to avoid a slump in consumption and a dent to economic growth.
Despite the generous subsidies, energy prices at the consumer level have risen steadily over the last six months as a result of international price increases.
Euro area annual inflation in February hovered at around 5.9%, while energy inflation in the EU moved much higher at 28.7%, and in Greece annual inflation in February reached 6.3%.
But the biggest concern is the visible evidence now accumulating which shows that persistently high energy prices are leading to a slump in economic growth, with Citigroup now estimating that the Eurozone’s 2022 GDP growth will average at 2.2%, down from its prior estimate of 3.3%.
Analysts believe that the slowdown in Greece’s economy could be double of that in the Eurozone on account of a subdued holiday season next summer, according to tourist industry estimates.
As part of the government support package and according to the three-part economic aid to vulnerable consumers, the government will increase the existing subsidy for electricity, while the subsidy for natural gas will be continued and companies are also included in the aid plan. The cost until April from this measure is expected to reach €640 million.
Read more about the European electricity prices surge here
