The government is planning another intervention in the energy markets in order to lessen the burden of spiking prices on households and businesses. Officials believe that, even if the war in Ukraine were to end soon, something considered unlikely, its impact on energy prices would still be felt throughout 2022.
At the moment an intervention on prices by the EU is considered unlikely by the government; Germany is reluctant to allow extra spending, as was done during the Covid-19 pandemic, arguing that European economies are still rebounding, despite the energy price hikes. France, whose considerable energy production from its nuclear power plants shields the country from the effects of the price hikes in oil and natural gas, is also cool to the idea of providing liquidity to help EU member-states to counter the adverse effects of the higher prices.
Thus, unilateral action by the government to mitigate the effects of energy price hikes, especially on the most vulnerable, is seen as inevitable. A smaller-than-expected deficit and better-than-expected revenue in the first quarter of 2022 make the government’s task easier, since it can raise spending without letting the deficit and debt get out of hand.
This time, intervention in the energy market will not take the form of subsidies of electricity consumption but rather a cap on wholesale energy prices. Also, VAT on some products, such as bread and milk, will be reduced. The government wants consumers to feel the positive effects of such interventions, not only out of concern, but with an eye to its own popularity, since an election – most probably double elections – looms a year away and possibly sooner.
Prime Minister Kyriakos Mitsotakis wants to lead his ruling center-right New Democracy party into the next election with a caring image, projecting an aura of competence and stability, which he will contrast with the “adventurism” of the main opposition, leftist SYRIZA party. The ultimate goal is to ensure a parliamentary majority after the second election, since the proportional voting system to be used in the first election will most likely result in a hung parliament with a very small chance of a coalition government.
Mitsotakis will also emphasize the fickleness of the socialist Movement for Change, the third largest party, “which advertises what it doesn’t want,” to argue for a strong vote for his party.