The Greek government is preparing up to 200 million euros in new support to help households and businesses cope with high fuel prices this winter, but it is deliberately holding off on the details.

The package would come on top of about 800 million euros in energy measures already in place, and its final size has not been set. Measures for gasoline and diesel are due to be announced on Sept. 30, followed by measures for heating oil on Oct. 14.

Athens is using the delay to gauge the direction of international oil markets. It is also watching an effort led by French President Emmanuel Macron and Fatih Birol, the head of the International Energy Agency, to secure a coordinated release of large volumes of oil from the strategic reserves of the Group of Seven major economies. Greater supply could ease prices before national governments are forced into heavier spending.

The government’s economic team is working from two scenarios. If international prices decline, limited state intervention and a contribution from Greek refiners are expected to produce a noticeable drop in pump prices. If prices rally again, the cost of support would rise sharply, fiscal room would narrow and the government would have to choose which fuels, and which consumers, it can protect.

Greece faces an unusual fiscal paradox, according to officials familiar with the planning. The country has the funds but not the fiscal room to spend them, because EU rules cap the growth of net government spending. Rather than leave budget surpluses idle at the Bank of Greece until the next debt payment falls due, the economic team intends to use them to contain energy costs.

For the same reason, no further early repayment of Greece’s debt is planned for now. As long as the duration of the crisis remains uncertain, officials consider liquid reserves more valuable. That does not mean the reserves can be channeled freely into subsidies. Any additional spending counts against the EU spending cap and could reduce the room available for other government measures.

Greece is also seeking a temporary cut to its excise tax on fuel and has raised the matter at the Eurogroup, which brings together eurozone finance ministers, and at Ecofin, its counterpart for all EU member states. Athens is requesting that the cut be exempted from the fiscal rules. The government does not intend to act unilaterally or breach the framework. Government officials acknowledge that, given the debt crisis and the bailout programs that followed, a unilateral Greek departure from EU fiscal rules would draw a stronger reaction from markets and European institutions than it would for other countries.

The size of the refiners’ contribution also remains open. The companies appear willing to help bring the pump price of heating oil down to about 1.50 to 1.60 euros. The scale of their discount will depend on the trajectory of international prices and on whether the EU moves to tax refiners’ windfall profits.

The government and the refiners agree that diesel should take priority because its price affects the entire production chain. Heating oil comes next, with the aim of keeping its price at an acceptable level when distribution begins. Support for gasoline would follow only if fiscal room remains.

The extent of that room has exposed differences within the government. One side favors a strong intervention from the outset, arguing that a modest package would be absorbed by price increases and fail to halt the decline in the government’s support. The other side wants to hold funds in reserve for January, when measures for natural gas or electricity may also be needed.

The divide does not simply pit a cautious Finance Ministry against the rest of the government. Officials there recognize that high energy costs can weigh on consumer spending, businesses and growth. In other parts of the government, the greater concern is the political cost, which is expected to be heaviest in Northern Greece. Declining poll numbers there are already a source of unease ahead of elections, and heating is a basic need that cannot be deferred until international prices fall.

Source: TA NEA