Our View: Government’s so-called ‘prudent policy’ is anything but

Although the subsidy of electricity bills, after its last extension, would have finally expired at the end of June, the government has now extended it to for another four months – until the end of October. The zero VAT on basic consumption goods will stay in place until the end of September, said government spokesman Constantinos Letymbiotis who announced the council of ministers decision on Wednesday.

The cost of the electricity bill subsidy will amount to €12m, he said, while the zero VAT would cost the government €11m. The amount will not break the bank, but when the specific subsidies are added up for the year, they are more than €50m which is no small sum of money. And it could be more, given the government’s unwillingness to end them despite the recommendation of the European Commission and the advice of the IMF.

Even Finance Minister Makis Keravnos, many months ago, had spoken about ending the across-the-board measures and replacing them with targeted measures, designed to help those most in need. He was also ignored. As Letymbiotis said on Wednesday, the electricity bill subsidy would affect 400,000 households and 100,000 businesses – the very antithesis of targeted measures. Zero VAT on basic goods is not a targeted measure either.

Yet the government insisted on talking about targeted measures and claiming it was following a prudent policy. Wednesday’s announcement said, “the responsible, prudent and fiscal policy the government exercises, far away from populism and far away from handout rhetoric gives us the ability to take targeted measures that improve substantially the daily life of our fellow citizens.”

This is political spin of the worst sort. Across-the-board support measures are neither prudent nor responsible and they are as close to populism as possible, despite the government’s spin. And how can across-the-board measures be described as targeted? The words are as far away from reality as possible, exposing the motives of the government. The only concern was avoiding the criticism that it would have come under if it followed the prudent and responsible fiscal policy of ending the blanket measures.

While the measures do not put public finances under any pressure at present, if the government continues to pursue policies “aimed to please” it will not be long before they would do so. When it cannot put an end to measures that have outlived their purpose and are no longer justified, because it is afraid of public criticism, it is showing weakness. This weakness is already being exploited by different organised groups, particularly public sector unions.

The government must start show more resolve, because there is a danger that it will eventually lose control, with disastrous consequences for the economy. It is not enough for it to say that it is prudent, when its actions tell a completely different story.