MacroPolis

The Greek government decided this week to offer yet another handout, which will reach certain groups before Christmas, as there is tangible evidence in hard data, and widespread dissatisfaction reflected in the opinion polls, that all its actions to tame prices have failed.

The authorities have made a conscious choice, which they stuck with throughout the inflation wave, to avoid intervening on indirect taxes to push prices lower. The government’s preferred course of action has been to give households and certain vulnerable groups handouts and subsidies. This approach aims to boost disposable incomes.

The PM announced in a radio interview on Thursday that before the festive period his government will roll out another subsidy to vulnerable households totalling 352 million euros, broken down into four main categories.

Low paid pensioners, earning below 700 euros monthly, will receive 158 million euros, the child benefit will get a 125-million-euro boost, 45 million will be distributed to those eligible for disability benefit and there will be 24 million euros in higher payments for the minimum guaranteed income.

In the most recent poll published on Thursday by Opinion Poll for Action 24 TV, the cost of living is the most pressing issue for almost 61 oct of the respondents, followed by the economy and growth on 38.4 pct. Issues that traditionally are high on the agenda of the conservatives, like crime and public safety and the migration issue, only poll at 10.6 pct and under 10 pct respectively.

In the previous survey by the same company in September, 75 pct of those questioned responded that they find the price hikes in basic goods as overwhelming. This is compounded by just 29 pct expressing some satisfaction with the performance of the government. More than 37 pct are not satisfied at all. A rate of 62 pct of those surveyed thought that the country is going in the wrong direction.

Just 14.5 pct of New Democracy voters are very satisfied with the government.

The findings are not much better when the PM’s performance, traditionally a strong card for the government. Just 35 pct showed a degree of satisfaction with his performance, with 25.6 pct believing he is doing just enough.

This is also reflected in the New Democracy’s rating in Thursday’s poll, where - without extrapolation - the support for the conservatives hovers around 31 pct, when just a few months ago in the national polls it reached 42 pct.

The government also loses traction in its approach when the findings of international organisations regarding inflation are taken into account. The latest addition was the European Commission. Its latest forecasts for autumn included a dedicated box breaking down inflation in the EU.

Looking at HICP from 2019 to 2022, the effect of corporate profits on inflation is broadly the same as the impact of energy and other import prices. Looking ahead, for the 2022 – 2025 period the Commission expects almost three quarters of the HICP rise to come from corporate profits, wages have a quarter impact, while energy and imports will contract.

The government has also based its communication message on the cost-of-living crisis around the narrative that the phenomenon is global and imported from outside Greece. Turning against multinational companies and the application of fines to household names like P&G, Unilever, J&J and Colgate that reached nearly 4 million euros, dilutes the imported argument. It indicates that there are domestic issues at play that the authorities failed to tackle.

With the eurozone’s Stability and Growth Pact set to be fully implemented again from next year, the Greek government has probably realised that this will be the last opportunity for a generous handout to the electorate, hoping that it will stem some of the dissatisfaction that has been visible recently.