by Antonios Zairis*
2022 is a particularly strange and sufficiently predictable year as it accumulates, firstly, the effects of the pandemic crisis with supply unprepared to meet the demands of excess demand due to high transport costs, reduced production of raw materials and shortage of labour mainly from Asia and, secondly, the effects of energy costs with a 155% annual increase in natural gas compared to 2021 and 56.7% in electricity respectively. If in the first case any increase in interest rates would probably "tame" inflation in the second case, however due to the inelasticity of energy it would be extremely difficult to tame any inflationary pressures. Energy and fuel price increases have affected and led to increases ranging between 5% and 15% in a number of inelastic goods and services that constitute basic necessities in the household basket such as potatoes, pasta, vegetables, fruit, olive oil, etc.
In a rolling survey on 10/04/2022, the Research Institute of Retail Consumer Goods (IELKA) estimates that the general public is "overwhelmed" by feelings of anger in 30% and fear in 26% about the war in Ukraine. 19% feel insecure, 13% worried and 15% anxious, and 87% believe that the war will lead to further increases in the prices of basic goods. On the other hand, the war acts as a multiplier of negative factors as the two warring countries’ share of world fuel and energy exports is extremely large. The latest Government intervention, with the Prime Minister’s announcements, has come to allay concerns and through the energy subsidy package with the new pricing mechanism (electricity price cap, suspension of the adjustment clause) about 80% of the increases in electricity prices are being absorbed, a measure which will apply retroactively and will ease the burden on both households and businesses. High energy costs and inflationary pressures have affected the cost of living and have forcibly redistributed the family budget and the household’s "basket" - since a large part of the budget has necessarily been oriented to pay energy bills, while reducing expenditure on food, clothing, etc.
The measures taken, which will be further specified below, come to transform the negative environment, to restore to some extent the balance in the supply-demand balance and the pricing policy of businesses to previous competitive price levels, preventing the prospect of any future increases - as the reasons for the price increases have now largely disappeared.
All of the above will bring about rationalisation and normality in the operation of the Greek market thanks to the responsible attitude of Businesses - Consumers - State, in an international and European environment extremely rigid and gloomy that causes concern and uncertainty.
*Deputy Vice President of H.R.B.A, Assistant Professor of Business Administration at Neapolis University of Cyprus and member of the American Economic Association
By: N. Peter Kramer
