The pre-election period has practically started, in August there will be a normal pause and from the autumn the staffs of the candidates will pick up the pace.
This fall, however, will not be an ordinary fall. The liquidity and extreme uncertainty that characterize the conditions in the economy will be present. The question that needs to be answered is whether returning from the beaches will find the voters calm and relaxed, with full batteries or facing a mountain of expenses.
During the pandemic there was a significant accumulation of deposits from households and businesses, but we all know that savings are difficult to increase and disappear with characteristic ease. No one today can predict whether price increases will stop in the coming months. Be careful: stop the increase, not see reductions.
The ECB, leaving open the possibility of an increase in interest rates of more than 0.25%, predicts that the problem of accuracy will not leave us easily.
What can be done?
Inflation is the & # 8217; the number one threat to middle-class incomes. The government has taken two important horizontal measures (fuel tax cuts and electricity consumption), but they are not enough to cover the revenue losses. To be honest, in our analysis no government can take measures to fully remedy the decline in purchasing power due to inflation. Even if there was money, which does not exist, a universal bonus policy would boost inflation. What can be done is to provide targeted support to vulnerable groups that are struggling to survive in these conditions.
And the middle class? This is where the political problem begins, which in the case of Cyprus is also practical because we have a presidential election ahead of us. Economics teaches us that accuracy will reduce demand and reduce demand will reduce prices. Reducing credit expansion as a result of rising interest rates will also help reduce prices. consume less.
From the autumn, the Presidential candidates will have to present their plan for the Cypriot economy in an environment conducive to inflation. Elections are offered for visions, but on the way to the polls of the 2023 presidential elections, the voter will have in front of him the fact of the reduction of his purchasing power.
The bitter experience of 2013 teaches us that the management of problems economy require honesty and timely management. For Cyprus, a greater risk than inflation itself is the pre-election relaxation in a toxic climate of confrontation.