European Governments Splurge €500bn To Cushion Energy Crisis

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Governments in Europe have earmarked nearly 500 billion euros in the last year to cushion citizens and companies from soaring gas and power prices, reports Reuters quoting a research published by think-tank Bruegel.

Curbing power prices and energy taxes

Months of surging prices have seen governments roll out measures to curb retail power prices, slash energy taxes and give subsidies to bill-payers.

European gas and power prices have rocketed as Russia has cut fuel exports to retaliate for Western sanctions over its invasion of Ukraine.

The EU’s 27 countries have collectively allocated 314 billion euros for measures to ease the pain, while Britain has set aside 178 billion euros, according to Brussels-based Bruegel.

If the cash governments have earmarked to nationalise, bail out or provide loans to ailing energy utilities was included, then EU governments have spent closer to 450 billion euros, the think-tank said.

Capping gas and electricity costs

Germany nationalised gas importer Uniper UN01.DE on Wednesday and Britain capped the wholesale cost of electricity and gas for businesses.

Many of the measures were designed to be temporary – but Bruegel said the state intervention has ballooned to become “structural“.

This is clearly not sustainable from a public finance perspective,” said Bruegel senior fellow Simone Tagliapietra.

Governments with more fiscal space will inevitably better manage the energy crisis by outcompeting their neighbours for limited energy resources over winter months.”

Addressing sky-high energy prices

Germany, the EU’s biggest economy, is by far the biggest spender in the bloc – setting aside 100 billion euros, versus 59 billion euros in Italy, or 200 million euros in Estonia, for example.

Croatia, Greece, Italy and Latvia have all earmarked more than 3% of their GDP to tackle the energy crunch.

The EU last week proposed bloc-wide measures to respond to sky-high energy prices, in a bid to overlay the patchwork of national responses with a coordinated reaction.

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Source: Reuters

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