ECONOMY

High energy costs here to stay in 2022

PM announces additional €395 mln in subsidies amid forecasts that prices will remain steep

high-energy-costs-here-to-stay-in-2022

With analysts predicting that high energy prices will continue in 2022, Prime Minister Kyriakos Mitsotakis announced Friday that the government would spend an additional €395 million euros in electricity and gas subsidies in January alone to support households and businesses in an effort to mitigate the impact.

The average aid to households will be €42 for electricity bills and €40 for gas. It concerns primary residences.

“The emphasis is obviously on relieving households. But we are also helping businesses stay on track for growth, while maintaining valuable jobs,” Mitsotakis said in a televised address Friday. 

“Mainly, [we want] to avoid increasing production costs and this then being passed on to product prices,” he said. “It is a bold but also realistic aid plan. It helps in the present, but it does not endanger the future.”

Greek inflation is expected to exceed 5% in December due to high energy costs and price increases in many products.

In his address, Mitsotakis also announced that another plan is in the works to promote energy conservation by introducing subsidies for replacing old electrical appliances, which will, in turn, be recycled. “Our goal is for all Greek homes to operate with modern and more economical electrical equipment,” he said.

Mitsotakis’ address came as international analysts are noting that volatility in the energy market will not be a temporary phenomenon and that prices will remain at historically high levels throughout 2022, triggering increases in other goods and services. 

This will make it one of the biggest issues this year for governments, households and central banks, threatening growth and businesses.

Although the price of gas in Europe has come down from the historic high of €180 euros/MWh in December to below €100 euros/MWh last week, daily fluctuations are still high, reaching even €20/MWh.

Similar fluctuations are seen in the price of electricity, which, though significantly lower in most European countries at €150-160 MWh from the record of €400 euros/MWh, is not expected to return to where it was a year ago.