Weber advocates for a ‘gradual exit’ from energy subsidies

The Croatian Employers’ Association (HUP) advocates for a gradual exit from state measures subsidizing energy prices, while also maintaining these measures for socially vulnerable citizens, stated the association’s director general Irena Weber on Thursday. The current government package of assistance to citizens and the economy is soon to expire, and a decision on the continuation or (gradual) cessation of energy price subsidies is expected in the coming weeks. In response to journalists’ questions ahead of HUP’s ‘Economic Coffee’ regarding the positive and negative aspects of state interventionism, Weber emphasized that HUP advocates for a gradual exit from measures limiting electricity prices, while also continuing to apply these measures for our socially vulnerable fellow citizens.

Moreover, HUP advocates that these citizens should have their water, electricity, and housing costs fully covered, so they can live a life of dignity. Regarding the measures, Weber emphasized that the exit from subsidies should be gradual, as a complete exit would represent too great a blow for small and medium-sized enterprises and households. She also reminded that, unlike most European countries, businesses in Croatia pay a higher electricity price compared to households.

When asked whether she expects that rising energy prices could lead to an increase in the prices of goods and services, Weber cited the recent cessation of state regulation of fuel prices, which did not result in higher prices at gas stations. She stated that energy producers need to be allowed to operate profitably, from which they will generate further developmental investments.

Ivanov: Higher energy bills will also increase the inflation rate

In response to a journalist’s question, she also stated that a gradual cessation of subsidies should not particularly affect Dalmatia, where electricity is used for heating.

– We do not expect a strong price increase. As we have seen, electricity prices have been stable for a long period. On the other hand, what we have emphasized is that the state is precisely there to intervene in times of crisis when it is necessary to protect citizens’ standards. Otherwise, we believe that a gradual and slow exit from these measures is necessary – concluded Weber.

In the fight against inflation, the state is currently capping prices on 70 products, and when asked whether this measure should continue, she stated that HUP absolutely believes that the need for these caps has long ceased to exist. She particularly highlighted their negative effect on agricultural producers, who often cannot compete with prices, thus practically encouraging the import of cheaper foreign goods, often of very questionable quality.

Ivanov on the effect of lifting measures on inflation growth

Professor Marijana Ivanov from the Zagreb Faculty of Economics assessed that certain higher electricity and gas bills certainly represent bad news for citizens and will also increase the inflation rate.

– The inflationary shock to citizens, which the state wanted to avoid with certain limiting measures, can occur when those limiting measures are lifted – she explained.

However, she added that the current capped prices are close to market prices, so the effect should therefore be milder. In conclusion, she stated that in the current ‘good times’, before the potential onset of a ‘recession wave’ on a global level, the state should stop such measures so that it can react in times of crisis.

– If you exhaust all measures and interventions during a period of expansion, what will you do when the economy starts to move in a negative direction – Ivanov rhetorically asked.