Utility hikes fuel inflation

Ministers may be condemning business cartels considered partly responsible for high consumer prices – instead of effectively dealing with the phenomenon – but at the same time they are approving steep increases in public utility rates, which certainly stokes inflationary pressures. The Development Ministry, for instance, this year has approved increases to the rates of the Public Power Corporation (PPC) totaling 15 percent. A rise of about 7 percent was approved last December and an 8 percent increase is due next month. The Transport and Communications Ministry has approved fare increases of between 10 percent and 100 percent for urban public transport, while intercity buses, taxis and haulage trucks have gained approval for or are about to apply hikes of 5 percent. Mayors have followed the example of ministers, increasing municipal taxes by an average of 4.8 percent this year, according to the National Statistics Service. Arguments for all the hikes, particularly those of utilities, have largely centered on rising fuel prices and to some extent are justifiable. However they could have been more persuasive if they had been accompanied by a more effective policy for containing deficits and operating costs. But the truth is that the costs and deficits of transport utilities in particular are not only not going down but have steadily increased in recent decades, irrespective of the fluctuations in the price of oil. Furthermore, the government’s responsibility for the sharply rising cost of living is not confined to its approval of utility rate hikes by the ministries. For the government is above all responsible for not having substantially improved the conditions for market competition. It has opted to negotiate increases with various categories of closed-shop occupations, such as recently with the owners of haulage trucks and fuel tankers, instead of pushing for deregulation of the sector. The result of this policy is accurately reflected in data of the European Union’s statistics service (Eurostat), showing that the rise in haulage rates in Greece was 5.3 percent in 2005, against an average of 3.9 percent in the eurozone, 6.1 percent in 2006 against 3 percent in the eurozone, and 4.3 percent against 2.2 percent in 2007. Water rates in Greece rose 5.4 percent in 2007 and 2.7 percent in the eurozone, while electricity hikes were more or less the same at around 4.5 percent.