ECONOMY

Inflation is PM’s greatest concern

Inflation is PM’s greatest concern

Prime Minister Kyriakos Mitsotakis sees the fight against energy-fueled inflation as crucial for his re-election chances.

Aides close to Mitsotakis call the fight against inflation the “mother of all battles,” borrowing the phrase from the War-on-Terror lexicon.

This is the fifth major crisis the Mitsotakis government has faced since being elected in July 2019: It was preceded by Turkey’s attempt, in early 2020, to weaponize migration by pushing hundreds of thousands of migrants to cross the Greek border; the start of the Covid-19 pandemic in March, 2020; Turkey’s aggressive actions in the Aegean in the summer of 2020; and the disastrous wildfires the following summer. This latest crisis affects all Greece, without exception.

The prime minister’s goal is to undertake a series of initiatives that will show, he believes, that he is the only political leader capable of dealing with the crisis. 

Domestically, Mitsotakis announced spending to the tune of 1.1 billion euros until June to keep a lid on price rises, partly by subsidizing electricity costs for households and businesses. He also “declared war,” as government officials put it, on price gouging. This strategy became apparent in the March 9 cabinet meeting, when Mitsotakis proclaimed, “We are either with society or the speculators.” In his latest appearance in Parliament, he pushed this rhetoric a little further by announcing that he would impose a 90% tax rate on “excessive” energy company profits.

Abroad, Mitsotakis has pressured for a unified European Union stance, saying it is the only way to succeed in taming inflation. He initially submitted a six-point plan to European Commission President Ursula von der Leyen that, among other things, would impose a ceiling on natural gas and electricity prices. On Thursday, the first day of the latest European Council, he asked the EU to centralize procurement of natural gas and negotiate as a supranational authority with natural gas vendors.

Opinion surveys confirm Mitsotakis’ belief that the focus on inflation is the right strategy: More than 85% of respondents said inflation is their biggest worry.

Of course, bungling the inflation strategy would backfire on the government’s popularity. Thus, part of Mitsotakis’ strategy is to emphasize the need for a coordinated EU response, buying time with the public.