Firstly, it is an electricity subsidy for the period until the end of the year, as well as for 2023: “as much as necessary.” It is estimated that around €500 million will remain to finance additional support measures, focusing on the very high cost of heating, as well as supporting poor households to cope with the sharp rise in food prices.

As for 2023, once the cost of the electricity subsidy is budgeted, fiscal space will be “reserved” to eliminate the solidarity collection and maintain reduced insurance premiums (about 450 million euros are required for 2023 compared to 2022 ). ), but also for pension increases, which also cost more than 650 million euros per year, according to updated 2023 measurements. With these “prerequisites” – 1.1 billion euros in pensions and solidarity contributions – but also with the cost of the electricity subsidy highly uncertain, it will be very difficult to “fit” any additional support measure into next year’s budget.

A few days before the prime minister’s speech at the Thessaloniki International Exhibition, the list of measures was finalized, and now Kyriakos Mitsotakis must make the final choice on what to include in the announcements and what not. The tone was set at a cabinet meeting: budget measures for both 2022 and 2023, with a focus on those most in need. Based on these data, it is expected to contribute to:

As for fuel, the possibility of integrating a new fuel passage into the TIF package is losing ground.

1. The electricity subsidy, which will absorb most of the additional fiscal space, is estimated at around 1.5-2 billion euros. In the quarter from October to December, the budget is estimated to spend about 1.5 billion euros to maintain retail prices at 14-15 cents per kilowatt-hour. The fact that electricity prices remain high does not allow financial staff to allocate less resources, as the huge ups and downs in natural gas prices make any forecasts uncertain.

2. Last year, 170 million euros were allocated to pay for heating. A significant increase in the fund is expected (even over 250 million euros), as the price of natural gas is above 200 euros per MWh, and heating oil will cost 1.7 euros per liter if the international oil price does not fall too much. price within the next six weeks. There will be an additional subsidy specifically for natural gas, but an attempt will be made to fund it primarily with resources from the Energy Transition Fund, as well as with additional discounts to be made by DEPA.

3. There will most likely be a new accuracy check to deal with very high food inflation. A “voucher” for more than one million beneficiaries can be worth more than 250-300 million euros. However, the implementation of this measure is considered a priority, as rising food prices have hit the poorest households the hardest.

4. For fuel, the possibility of including a new fuel pass in the package is losing its position. The price of unleaded petrol has fallen well below June levels and is expected to sell below €2 per liter again next week. Thus, it is most likely that the €200 million worth of subsidies for lead-free products will not be allocated (at least for now). Most likely, only the diesel fuel subsidy will remain, which costs about 30 million euros per month, or 90 million euros by the end of the year.

What does the Ministry of Finance expect?

A major fiscal adjustment is needed in 2023 as the 2% primary deficit in 2022 should become a 1% primary surplus. In practice, this means 6 billion euros. These 6 billion euros should “fit”:

1. The cost of subsidizing electricity. If the cost remains at the level of 500 million euros per month, it will be very difficult to “fit” anything more in the 2023 budget.
2. The cost of abolishing the solidarity levy, i.e. an additional 450 million euros due to the extension of the measure to pensioners and civil servants.
3. The cost of raising pensions. The economic staff “ran” the 6.5% scenario, in fact predicting the sum of growth and inflation of about 13% (5% growth and 8% inflation). Two out of three pensioners are estimated to be the beneficiaries of the increase (the rest have a positive personal difference), and the “gross” fiscal costs are estimated at around 50-55 million euros per month, or about 600-650 million euros. Of this amount, a percentage of about 30% will be returned to the state through tax revenues.

The finance staff is finalizing this week the assumptions on which the execution of this year’s budget will be based, as well as the preparation of the budget for 2023, since on their basis there is a fiscal space that can finance support measures both this year and next. Calculations are made taking into account the containment of the primary deficit:

• Assumption 1: The electricity subsidy will take up less space in the budget in October-December compared to September. In other words, it is assumed that the cost per month will be significantly reduced below 500-600 million euros against 800 million euros, which will be allocated for September exclusively from the state budget. In addition to the assessment that natural gas will not be sustained for long at the incredible level of 300 euros per megawatt-hour – the price has already fallen by more than 100 euros within a few days – there are also “technical” reasons for which this estimate is based. They are associated with the production in the coming months of more electricity from cheaper fuels such as renewable sources and lignite.
• Assumption 2: Tax revenues will continue to rise until the end of the year. Month 8 budget progress will be announced in the coming days and the surplus in tax revenue is expected to increase further. In the 7th month, the surplus reached 5.2 billion euros, and in the 8th month it is expected to approach 6 billion euros. According to financial staff estimates, thanks to the dynamics of tax revenues (from income tax and VAT), fiscal space of 300-350 million euros per month will be “developed” by the end of the year.
• Assumption 3. The growth rate for this year is revised from 3.1% to more than 5%. The announcement of GDP changes for the second quarter is expected within a week. There is optimism that with the “vehicle” of investment, consumption and tourism, growth rates will exceed 5%-6% in the period April-June, covering the “damage” caused to GDP due to imports by high energy prices.
• Assumption 4: Tourism revenues will exceed 2019 revenues, although initially estimated to exceed 80% of 2019 revenues. This means that they will exceed 18.5 billion euros, with an optimistic forecast raising the bar even to 20 billion euros.
• Assumption 5: The price of oil will be held in the next period at a level corresponding to today’s or even lower. This – and combined with electricity subsidies – will bring inflation down to single digits by the end of the year, keeping the national average at 8%-9%.
• Assumption 6. In 2023, the Greek economy will continue to grow at a rate of about 3%, and next year there will be a noticeable decrease in average inflation below 4%.