Greece to cut industrial energy cost, defying lenders

By Harry Papachristou

Greece will reduce industrial companies' energy costs to save two struggling steelmakers, the government said on Tuesday, shrugging off objections from international lenders that the move might blow a hole in Athens' finances.

It was further evidence of the debt-laden country adopting a more assertive stance towards its creditors as it tries to soften the impact of bailout-imposed austerity policies on its depressed economy and mitigate record unemployment.

Halyvourgiki and Hellenic Halyvourgia, two of Greece's biggest steelmakers, said last week they would dismiss or suspend about 320 workers at their Athens factories because they could not compete due to high electricity costs.

This sparked a public outcry and Development Minister Kostis Hatzidakis said the government would override objections by the so-called «troika» of international lenders and introduce flexible power prices to lower the firms' costs.

Athens will push through so-called «interruptibility» agreements, under which big power consumers can briefly take their factories off the grid and get refunds from Greece's state-run power network operator, Hatzidakis said.

The troika has hitherto blocked such deals because it fears they could strain the finances of both the grid operator and utility concerns that would foot the bill. Greece's energy system nearly collapsed in a liquidity crisis in mid-2012.

"This will displease the troika, but the way things stand, we have no choice,» Hatzidakis, whose ministry is in charge of industrial policy, told radio station Skai.

Electricity accounts for more than half of the troubled steelmakers' operating costs, a senior executive of one of them told Reuters on condition of anonymity.

An austerity-fuelled, six-year recession has hit Greek construction hard, slashing domestic demand for steel products to about 300,000 tons a year from 2.5 million before the crisis, according to the senior executive.

Hellenic Halyvourgia sustained a net loss of 37 million euros and Halyvourgiki of 58 million, according to their latest published financial statements for 2012 and 2011 respectively.

"We're operating at just 10 percent capacity,» the executive said. Exports that could compensate for some of the domestic slump are not competitive enough to match rivals in neighboring Italy or Turkey which have lower costs, he added.

Greece will resume talks with lenders on Monday to agree on the disbursement of rescue loans under the country's 240-billion euro bailout.

Emboldened by a budget surplus it may have achieved last year, Athens wants its lenders to cut it some slack and refuses to take on any new austerity.

The unemployment rate soared to a record 28 percent in November. Greece's fragile government, which trails the opposition in the polls and whose survival may hang in the balance in European elections in May, has pledged to fight joblessness.