Difficult equation for budget

Finance Ministry in balancing act between increased revenues and high subsidy needs

Difficult equation for budget

The hard times will begin in earnest in the autumn for the Finance Ministry, which will have to solve complex equations determining the amount of interventions that can be made without disrupting budget objectives.

Moreover, such estimates cannot be made with absolute accuracy, as the variables keep changing on a daily basis. The course of revenues, the rates of natural gas and electricity, retail market price hikes and household problems are the factors shaping both the fiscal space available and the support measures to be taken.

The government has calculated interventions for the whole year to the tune of 2.8 billion euros through the budget, per the stability program of April. The improved performance of revenues in the first quarter of the year led the government to the change the target set in the budget for the better, while the target for the deficit was widened from 1% to 2% due to the war in Ukraine and the energy price spike.

Of that amount, €2 billion has already been allocated and, based on the target, about €800 million remains to be given, mainly to support electricity consumers.

However, it is possible that takings will prove even better and, as government sources report based on today’s data, the amount available will reach a minimum of €1 billion and a maximum of €1.5 billion in the last quarter of the year. Of course, increasing the available fiscal space does not necessarily mean that households will receive more. And this as gas and electricity prices change on a daily basis, limiting the amount available.

Crucially, that fiscal space of €800 million to €1.5 billion, depending on the evolution of public revenues, may not cover the needs that will be required in the final months of the year.

Frequent fluctuations in gas and electricity prices change how much the government will need to support households: The TTF (Title Transfer Facility or Title Transfer Fund) is established at the six-month level at 100 euros/MWh, leading to needs of €1 billion, but if the TTF climbs to 200 euros/MWh, needs will soar to €1.8 billion.

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