The limits of endurance

The steep rise in the cost of oil is creating serious problems – not only general ones for the national economy but also very specific ones for people with low incomes. Heating fuel will be considerably more expensive this year, making it even harder for many households to cover their increasingly costly basic necessities. With that grim prospect, it is reasonable to consider a special grant for poorer families that would help to cover part of the cost of heating fuel this winter. Adopting such a populist measure is a great temptation for any prime minister, and clearly so for the current one. But the problem is the budget’s ability to bear the burden. The government rejected the idea, citing the fact that Greece has the highest public debt in the European Union and has made specific commitments to re-establish fiscal balance. Some European countries have announced their intention of providing such a grant. They do so because they are able to, consequently they are not an example for Greece to follow. What could really be a common goal for all EU member states is that of bringing coordinated pressure to bear on the large oil companies to reduce prices. There is considerable leeway, as the companies concerned are making huge profits from the massive increase in the price per barrel. Initial pressure from European governments has had some small effect. Systematic pressure is obviously needed if prices are to fall substantially. What is most important, however, is to take drastic measures to curb speculation, which has taken on alarming dimensions. In general, experts agree that increased international demand is only partially responsible for the current price of oil. The truth is that speculation has turned an upward swing into a frenzied rise. The unfavorable effects of these developments on oil prices have not yet become fully apparent. But if the rising trend is not halted and reversed soon, European economies will be sorely tested. And, naturally, the Greek economy is no exception.