Since September 2021, European governments have spent a total of €280 billion on alleviating Europe’s energy crisis, according to estimates by think tank Bruegel.
This amount includes all European governments’ expenditures to cover the burden of the crisis on regional businesses and citizens, including subsidizing small business rates in Greece and direct payments in Belgium. Some of the allocated funds have not yet been realized.
“Prices (for energy – IF) will be high throughout the winter, and European countries must work with a worst-case scenario in which prices remain so even after that,” said Bruegel analyst Giovanni Sgaravatti. – Governments need to focus on ways to reduce demand in sectors where this is possible.
What is causing Europe’s energy crisis?
Energy prices on the continent have jumped more than 10 times their seasonal averages over the past five years as Russian gas supplies declined. This factor is negatively affecting economic growth in the region, putting heavy industry in difficulty. At the same time, ordinary citizens face a sharp rise in the cost of consumer goods and services.
Among European countries, Germany allocated the most funds to support the population in the conditions of the energy crisis – 60.2 billion euros, or 1.7% of the country’s GDP. Italy spent €49.5 billion (2.8% of GDP); France – €44.7 billion (1.8%); Great Britain – €44.3 billion (1.6%) and Spain – €27.3 billion (2.3%).
“European policymakers have responded to the spike in energy costs with wide-ranging price-cutting measures involving subsidies, tax cuts and price controls,” the IMF experts said in their monthly report, adding that such measures have led to a disregard for the need to act on energy savings. “As a result, global energy demand and prices have been higher than they could have been,” the report said.
Earlier we reported that business activity in the euro area fell for the second consecutive month in August.