Government wants to cut fuel consumption tax, hit at inflation

Fears of runaway inflation have led the new conservative government to abandon its position that a properly competitive market would sort things out and to call for measures to bring fuel prices under control and prevent excessive price hikes during the Athens Olympics in August. At an Inner Cabinet meeting yesterday, Development Minister Dimitris Sioufas said that he has already taken initiatives to lessen inflationary pressure from fuel hikes. The most important of these, however, a call on the European Commission to implement a mechanism for concerted cuts in the fuel consumption tax at times of rapid rise in international oil prices, must be approved by the council of European finance ministers (Ecofin), Sioufas said. He added that, although Greece has the lowest fuel consumption tax among the older EU members, it cannot proceed unilaterally to lower it, as this would be considered by the Commission a subsidy in disguise. Souflias told reporters after the Inner Cabinet meeting that Greece’s higher dependence on oil relative to other EU countries – it spends 3.8 percent of its GDP annually on oil imports, compared to an average of 1.4 percent for other EU members – made the success of this initiative even more urgent. Deputy Development Minister Giorgos Salagoudis said yesterday that Commission Vice President Loyola de Palacio, in charge of transport and energy, was «positive» to the request for a concerted reduction in the fuel consumption tax and had left the way open for a unilateral application of a lower tax by Greece due to the Olympics. Salagoudis and de Palacio met over the weekend at an international energy forum in Amsterdam. There, ministers of several countries, as well as the Commission, expressed their agreement on the need for an increase in crude production and their concern over unstable global oil prices and signs of speculative activity in futures markets. Back in Greece, Sioufas repeated that he would mobilize the resources of the Competition Commission to put a check on fuel prices, adding that price monitoring at gas stations is now far more intense than before and that the ministry’s general secretariat for the consumer is in constant touch with prefectures all over Greece to keep an eye on price disparities. Furthermore, Sioufas called on producers and retailers to show «responsibility, self-restraint and respect for the more vulnerable social groups.» Deputy Development Minister Yiannis Papathanassiou, the main proponent of the belief that markets can regulate themselves, yesterday met with representatives of producers, retailers and unions to extract promises that prices will not go sky-high during the Olympics. In other words, Papathanassiou took a chapter out of book of the previous, Socialist government, whose efforts to get producers and retailers to agree to keep prices low he had widely derided while in opposition and during his first weeks in office. However, the government found itself with the prospect of inflation reaching as high as 4.5 percent during August, up from 2.9 percent at end-April, and has been shocked into action. In a slightly pompous fashion, Papathanassiou declared the creation of a «National Front of Olympic Cooperation,» comprising producers, retailers, employees and consumers, in order «to showcase (during the Olympics and the Paralympics) the Greek market as an attractive and quality market.»

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