Market support measures worth €550m may prove insufficient

A number of electricity market support measures planned by market authorities and firms for the next few months are estimated to be worth 550 million euros, but this may not be enough.

The effectiveness of the measures will depend on the depth and duration of the pandemic-related recession, still in the making.

Should the Greek economy contract by 10 percent this year, as projected by the IMF in a report announced yesterday, and the effects spill over into 2021, as is feared, then the current measures will prove insufficient.

Authorities yesterday announced an initiative offering lighter terms to electricity suppliers for surcharge payments to market operators.

Electricity suppliers will be able to pay 30 percent of their regulated charges marked out for the power grid operator IPTO, distribution operator DEDDIE/HEDNO and RES market operator DAPEEP for the two-month period of April and May over four monthly installments, according to an energy ministry plan. This measure, alone, is estimated to be worth about 200 million euros.

Also, power utility PPC and distribution operator DEDDIE/HEDNO, its subsidiary, appear to have secured European Bank for Reconstruction and Development (EBRD) loans, for next month, totaling between 180 to 200 million euros.

Greek debt is on Eurogroup’s table

The issue of the Greek debt sustainability will be put on the negotiating table at the Eurogroup meeting on Monday. The aim is to achieve a comprehensive, political agreement.

The agreement must include: the ratification of the institutions’ draft report on the measures voted, the definition of the primary surpluses that Greece must meet after 2018 and the definition of the medium-term measures on debt so that the IMF participates in the Greek programme.

Before the meeting of the finance ministers, an extraordinary meeting of the EuroWorking Group will take place.

It is expected to be a long meeting as all sides are aware of the importance of reaching an agreement. However, there is still distance between Berlin and the IMF.

Energy issues, on hold, must be cleared for review conclusion

Disagreements and pending issues concerning bailout-related energy sector measures are high on the agenda and will need to be overcome if the ongoing and prolonged second review of Greece’s program is to be concluded, European Commission officials have underlined.

Creditor representatives cannot be expected to return to Athens in the effort to conclude the bailout’s second review unless the pending energy issues are resolved, an official in Brussels has pointed out.

A decision by finance minister Euclid Tsakalotos, his deputy Giorgos Houliarakis, as well as labor minister Efi Achtsioglou to remain in Brussels yesterday appears to be linked to an effort aimed at settling pending labor issues. A team of IMF officials is currently also in Brussels. It has become apparent that the Greek bailout’s second review will not be concluded unless the IMF offers its approval, especially on labor measures.

This does not appear to be the case with the energy-sector issues. Convergence with the European Commission on a schedule mapping out a sale plan for main power utility PPC units would suffice for an agreement at a technical level.

Also yesterday, energy minister Giorgos Stathakis was in Berlin to participate in an energy conference before heading to Italy following an invitation by Italian multinational oil and gas company Eni to discuss hydrocarbon prospects.

Though Greece’s energy issues appear to have been temporarily placed aside as government officials grapple with the lenders on labor matters, the second review’s finalization cannot be expected without an agreement on the future of Greece’s electricity market and PPC.

According to sources and leaks, government officials have now realized that the lenders will not tolerate any further maneuvering from the Greek side that could delay the implementation of inevitable structural reforms needed to support the electricity market’s liberalization.

Certain sources claim that PPC has already begun preparing a portfolio of company units to be sold. Utility officials hope a downsize will reshape the corporation as a leaner but meaner enterprise.

 

Reform needs, not additional taxes, Mytilineos stresses

The European Commission needs to intervene more firmly on the Greek bailout program and apply pressure on the government for further reforms needed by the economy instead of tax increases, as is being demanded by the IMF, Evangelos Mytilineos, the chief executive officer at the Mytilineos corporate group, has told Euractiv, a news portal focused on European news.

Mytilineos believes that the European Commission is not applying as much pressure as it should to stop tax increases and instead shift the focus to structural reforms.

“Unfortunately, the bailout agreement is being driven by taxes. The IMF’s position on increasing taxes has dominated over reforms, which Greece’s public administration is continuing to strongly object to without an interest to alter decades-old habits,” Mytilineos noted. “The European Commission has a role to play here, which it is currently not playing, and this is to push for further structural reforms.”

Following a turbulent year in 2015, the Greek government has had no choice but to learn fast from mistakes, Mytilineos believes. “Any government, whether left-wing or right-wing, needs to comply with regulations if it wants the country to remain a member of the EU,” Mytilineos said. “There is not much leeway for maneuvering.”

The need for structural reforms was also highlighted in the latest Economic Cooperation and Development (OECD) report on Greece, released last week.

Energy sector reforms included in Greece’s first bailout agreement back in 2010, intended to generate competition in the electricity market and limit monopolies, have been severely delayed. However, there has ben no holding back on taxes imposed on energy. They have risen dramatically during the bailout era. Taxes imposed on natural gas consumed by the industrial sector amount to 40 percent.

“How can a Greek industrial enterprise remain competitive when tax levels in other countries, both within and beyond the EU, are 5%, 8%, 10%, 12%,” Mytilineos questioned.

The European Commission has set itself the objective of reviving the continent’s industrial sector, which it aspires will represent 20 percent of European GDP by 2020, from 15 percent at present.

This seems like a utopian target, especially if applied to countries such as Greece, where the industrial sector represents just nine percent of the country’s GDP and energy costs remain high despite the plunge in international crude oil prices.

Asked to comment on unchanging electricity prices in the local market, Mytilineos attributed the case to the structures of Greece’s economy and, especially, the energy sector. However, the corporate head said he expects to see gradual benefits for consumers within the next few months from the developing competition between main power utility PPC and privately run suppliers.

At present, PPC controls 94 percent of the local electricity market while several independent enterprises share the remainder.

Mytilineos would like to see a fall in electricity prices. Aluminium of Greece, a member of his corporate group, ranks as PPC’s largest power consumer and requires about five to six percent of the country’s total electricity production to operate.

Responding to a question on whether he considers Greece as being detached from the European energy sector’s wider developments, Mytilineos noted that gradual change was now occurring. DEPA, the Public Gas Corporation, is no longer the country’s exclusive natural gas importer as M&M, a member of the Mytilineos group, has now also entered the market. Also, new electricity interconnections with neighboring countries are being developed to increase Greece’s options.