Relief measures: A new package ahead? Scenarios and challenges

The contented of supporting households is erstwhile again dominating the government’s agenda, adjacent earlier the bundle of measures already announced has been afloat implemented.

Energy prices are surging sharply, while Europe remains reluctant to easiness fiscal constraints successful bid to make further fiscal space. The week begins with unleaded substance prices reaching their highest levels since the outbreak of the war, some astatine wholesale and retail levels. This importantly increases the likelihood that ostentation will stay supra 5% for yet different month, arsenic the diminution successful diesel prices unsocial is insufficient to reverse the trend.

As the state moves toward a caller grounds precocious successful retail substance prices — astatine slightest for unleaded gasoline, which affects a larger fig of drivers — the economical staff is expected to determine within the coming days whether to use the government’s remaining reserve money for the financing of further support measures, which presently amounts to 200 cardinal euros. By the extremity of the month, the authorities indispensable denote whether the subsidy connected diesel substance will beryllium extended.

a) If the subsidy is not extended, the yearly summation successful diesel prices successful June — assuming nary alteration successful planetary marketplace conditions — is expected to scope 37%, compared with 24% currently, with corresponding implications for June inflation.

b) If the subsidy is extended, astatine slightest 50 cardinal euros will beryllium drawn from the 200-million-euro reserve fund, without immoderate assurance that such expenditure will subsequently beryllium excluded from the fiscal accounting model governing “net expenditure,” fixed that the diesel subsidy constitutes a horizontal and universal support measure.

Decisions astatine the past minute

Government officials importune that decisions will beryllium taken virtually astatine the past imaginable moment, arsenic the latest available information indispensable archetypal beryllium assessed. (An hold of the diesel subsidy tin beryllium implemented done a elemental ministerial determination and does not necessitate further legislative intervention.)

Why such caution?

1. Firstly, due to the fact that adjacent today the bulk within the Eurogroup remains opposed to fiscal easing. Despite ostentation affecting the full euro country and the European Central Bank preparing to denote involvement complaint hikes, perchance arsenic aboriginal arsenic June, the prevailing logic is to safeguard sovereign enslaved yields. The war successful the Middle East has accrued borrowing costs crossed Europe — with German yields supra 3%, Italy astatine 4%, France adjacent 3.8%, and others — and, fixed the hundreds of billions of euros successful enslaved issuances planned by Europe’s largest economies, policymakers see it indispensable to debar creating interest successful the markets, adjacent arsenic household incomes crossed Europe are already under pressure.
2. Secondly, due to the fact that adjacent if the Eurogroup signals support for “targeted fiscal flexibility,” this would use lone to temporary and one-off measures. The diesel subsidy does not autumn into this category, starring the economical staff to hesitate implicit maintaining a measurement that cannot evade the scrutiny of the European Commission.
3. Thirdly, due to the fact that it is still lone May, and the remaining 200-million-euro reserve is apt to beryllium insufficient should the situation persist — a script that progressively appears plausible. The government’s economical team does not wish to breach fiscal rules, arsenic astatine slightest ten different countries person already done, peculiarly with the imminent Thessaloniki International Fair in September. The cardinal nonsubjective remains the plan and implementation of imperishable support measures for adjacent year. A breach of fiscal rules this year would not lend positively toward that goal.

The authorities has already earmarked 1 cardinal euros for further support measures successful 2027, with the purpose of safeguarding these resources and distributing them to citizens astatine the start of the caller year.

At present, each scenarios regarding diesel substance subsidies stay under consideration.

Accelerating implementation of the 500 cardinal package

The economical staff besides considers it imperative to accelerate the implementation of the 500 cardinal euro support bundle announced successful aboriginal April. The applicable draught authorities is expected to beryllium released for nationalist consultation instantly and will stay under consultation for 15 days. This will beryllium followed by parliamentary support and the issuance of implementing decisions.

The cardinal priorities are arsenic follows:

I. Payment of the bonzer kid allowance (150 euros per child) by the extremity of June or, astatine the latest, aboriginal July, arsenic this measurement unsocial accounts for astir fractional of the support package, with a fund of 240 cardinal euros.

II. Launch of the exertion level done which farmers whitethorn use for fertilizer subsidies by the extremity of the month, enabling them to person compensation astatine slightest for the play from March 15 done the extremity of April.

III. Commencement of the 72-installment indebtedness colony strategy and the expanded out-of-court restructuring mechanism, including the eligibility of debtors with liabilities exceeding 5,000 euros.