The electricity price subsidy is misdirected and risks having the opposite effect, says one of Sweden’s leading economists, John Hassler, who is professor of macroeconomics at Stockholm University. He believes that households with housing loans are at risk of losing out on the electricity price subsidy.
John Hassler believes that the electricity price support drives up inflation, which means that the Riksbank needs to raise the interest rate even more than would otherwise have been necessary. Without the announced electricity price support, the Riksbank might have only had to raise the policy rate by 0.5 percentage points in November instead of by 0.75, according to Hassler
– You can’t just stare blindly at the fact that money is now coming from the state. You have to realize that if everyone gets this money, it will have negative other types of effects – like an interest rate increase that might hit many people worse than the electricity price increase, says John Hassler.
But John Hassler’s image is not shared by everyone. The national association of villa owners believes that the electricity price subsidy is urgent.
– We receive daily phone calls, we receive letters in which people describe that they cannot cope with this, that many villa households have hard-pressed finances. So it’s about the steepness of the ruin, says Jonathan Lindgren, social policy expert at the Swedish Association of Villa Owners.
The electricity subsidy that the government hopes will be paid out to households in southern Sweden in February is estimated to be around SEK 17 billion, according to the Energy Market Inspection (EI). The calculation is based on consumption statistics from Statistics Sweden, which show that roughly 30 percent of the total support pot of SEK 55.6 billion would go to households.
But exactly how much support will be paid out to companies is currently unclear, since EI set a ceiling for large consumers and required an application procedure where the companies must show that they received increased electricity costs.
According to EI, the ceiling means that SEK 21-23 billion can be paid out without applications from the recipients, while SEK 16-18 billion requires justification in an application procedure.
Sources: Energy Market Inspection, Swedish Power Network, Statistics Sweden.
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