A Greek energy spat is getting out of hand – the EU must listen

While Britain beats itself up over its future in the EU, across the other side of Europe, a little-noticed law case has been meandering along that has far-reaching ramifications for the high-ups in Brussels.

As someone who visits Greece regularly, loving the country to bits, I’ve always had my doubts about the ability of Athens to deliver on the 2015 EU bailout. Indeed, it was precisely the characteristics I so enjoyed, and inevitably find myself yearning for during the dark days of an English winter, that drives the scepticism. The languor of beaches, olive groves, village squares and restaurant terraces under a fierce sun, the relaxed pace of life, the obvious delight of a populace in treating central authority, and rules and regulations, and above all, taxation, with disdain.

Admittedly my view was hardened during the holiday season, far away from the capital, on the isles and Peloponnese. Even so, it was possible to get a measure of a proud nation that for centuries went about its business in its own way, at its own speed. The notion it might suddenly change to satisfy the requirements of an externally-imposed rescue package was, I thought, fanciful.

The legal suit centres on the electricity industry. Under the terms of the deal with the EU, Greece was required to lower its energy prices for consumers – the idea being that by unburdening them, and freeing spending and investment, the economy would have more chance of growing and flourishing, instead of suffocating under a mountain of government debt.

Soon, the Greek High Court will hear an appeal from an Athens criminal court finding that a private power company stole money from the Greek people. The electricity firm, Energa, was found to have misused funds on the basis they were not a private utility supplier but still in public hands.

According to the bailout and EU law, Greece was supposed to have privatised its public utilities in order to push down prices. Ever since 2009, the EU had been on the case. Then, the country’s Public Power Corporation or PPC, the largest electric provider in Greece, was challenged by Brussels for holding an overwhelming monopolistic position. The Greek response was to allow an independent energy supplier, Energa, to develop and gain market share.

Energa was the first private company to acquire a licence to supply electricity to consumers in Greece. The firm went head to head with PPC, and their burgeoning rivalry was cited as proof of Athens’ determination to break-up the monopoly, to introduce genuine competition, and to reduce stifling electricity bills.

open image in gallery

Within just a year, Energa had gained an impressive 8 per cent of the market. PPC, though, was not prepared to stand by and see its very existence threatened. Among the measures it took to try and slow Energa’s advance, was to persuade Lagie, the Greek government regulator, to hit the newcomer with additional charges for supplying islands that were not connected to the power network.

These new “fees”, it was claimed, were justified because Lagie was effectively supplying electricity to Energa. This is where it gets interesting, and well, very Greek. Lagie is the official controller of the market, a facilitator and collector of taxes on behalf of the government.

That at least is the European Commission view of Lagie’s role. What it is not, says Brussels, is a “supplier”.

Nevertheless, this official body was able to slap the extra costs onto those private companies seeking to enter the newly accessible electricity market. Energa was hit with €​80m (£69m) in this new “tax”. It challenged the bill, maintaining the add-on was tantamount to a punitive fine.

The dispute has been rumbling on. Energa argued they were already overpaying Lagie taxes, and that any row between Energa and Lagie over taxes was commercial in nature and should be handled in the administrative or civil court, not the criminal court. However, Energa was then slapped with a charge of embezzling public funds, a crime under Greek law.

This was because it was claimed Lagie is part of the Greek government, a “supplier” of electricity, and that therefore any company being supplied the electricity is, in effect, a “direct representative” of Lagie. So, failure to pay the new charges was tantamount to siphoning public money.

The lower court has decided in Lagie’s favour. Now, its decision is being challenged in the High Court. If that body upholds the earlier ruling, then that would mean that every private energy company in Greece is a “direct representative” of Lagie, and that the Greek government retains complete control over the energy market, and the monopoly the EU was so anxious to end is still very much alive and kicking. And, that the bailout, with its attendant obligations, is being ignored.

This is why the forthcoming proceedings in an Athens courthouse matter, and why Brussels should be paying attention. It may have to step in and consider whether its own laws are being violated, that the requirements put in place as a condition of the financial lifeboat are being flouted, and if it needs to act.

A lot is riding on interpretation and nuance. The episode takes me back to the time when my sandal broke and I asked the shopkeeper on the Greek island where I was staying why he was charging more for a pair of Havaianas than in London’s West End. That’s because in Greece they’re imported, he said. They’re imported in the UK as well, I replied – they’re made in Brazil. Yes, but because they’re imported the Greek government can get a fix on them and slap on a heavy tax – hence the price. But did he pay any tax? I asked. He shook his head firmly. Judging by his accompanying broad smile, he could not believe I’d asked such a stupid question.

Chris Blackhurst is a former editor of The Independent, and director of C|T|F Partners, the campaigns, strategic, crisis and reputational, communications advisory firm