Greece Won’t Cut Oil Tax

A cloud of smoke hangs over the northern suburbs of Thessaloniki Greece, Wednesday, Dec. 25, 2013. Air pollution have far exceeded the health risk thresholds in Thessalonki in the last two days. (AP Photo Nikolas Giakoumidis)

ATHENS – With doctors warning that smog from fireplaces has hit dangerous levels, the Greek government said it will not cut the heavy tax on heating oil and said subsidies to buy the precious commodity will be available to nearly half the residents of the country.

Prime Minister Antonis Samaras ignored the pleas of 41 of the 126 Members of Parliament from his New Democracy Conservative party to cut the tax so that more people could buy oil instead of burning wood, plastic, construction debris and whatever else they can find that is flammable to keep warm.

Many others are using braziers and makeshift stoves because their electricity has been cut off as big pay cuts, tax hikes and slashed pensions have left them unable to afford their utility bills. There have been several deaths from fire and carbon monoxide already this winter.

In a joint press conference held after an emergency meeting on Christmas Day, Finance Minister Yannis Stournaras, Health Minister Adonis Georgiadis and Environment Minister Yiannis Maniatis said that responding to demands to reduce the tax on heating oil back to 2012 levels would be playing into the hands of fuel smugglers.

They also said that they are taking steps to ensure that households receiving reduced electricity rates because of their impoverished status will receive electricity free of charge on particularly cold days when smog levels are forecast to rise.

“We recognize the problem, but reducing the price of heating oil is not the cure,” Stournaras said in the wake of multiple warnings with regard to the high levels of air pollution in Athens, Thessaloniki and other major Greek cities as a result of households burning wood to stay warm.

“Reducing the cost will boost smuggling and ultimately mean that we are subsidizing everyone, even those who use heating oil to warm their swimming pools, to cite one extreme example,” Stournaras said, adding that the government has taken steps to ensure that more impoverished households are eligible for heating oil subsidies this winter compared to last.

Air pollution on Dec. 23 surpassed 200 mg/m3 level in Thessaloniki and other parts of northern Greece, and in other parts of the country overshot the 150 mg/m3 level the government last week set as a the trigger level at which it would offer free electricity to poor households. The government said that it will revising this level down to 100 mg/m3.

Georgiadis backed the decision and said that five million people are currently eligible for heating oil subsidies, while Maniatis urged households that pay reduced electricity rates to take advantage of the measure and use heating devices that have a smaller environmental impact. But electric heaters are useless for people who don’t have electricity and oil-filled radiators can be prohibitively expensive to operate.

Maniatis also said that it will be up to regional governors to decide when to trigger the measure for free electricity to be provided based on smog readings. Samaras’ coalition partners, the PASOK Socialists, have said nothing.

Stournaras didn’t respond to the New Democracy lawmakers, most of them from rural areas,  who said that they wanted the tax cut so that their constituents could buy fuel to stay warm. The increased tax has backfired, resulting in a number of oil companies going out of business and driving down expected revenues as people stopped buying oil and turned to fireplaces.

The finance chief also went again his own deputy, Alternate Finance Minister Christos Staikouras, who said that reducing the tax would increase the consumption of heating oil but that Greece’s lenders, the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) wouldn’t allow it.

The 41 lawmakers cited a study by the IOBE think-tank showing heating oil consumption has dropped by about three-quarters since 2009. In terms of revenues from heating oil tax, the government was more than 200 million euros ($273.86 million) behind its target at the end of November.