SHARE
COPY LINK

ENERGY

How European countries are spending billions on easing energy crisis

European governments are announcing emergency measures on a near-weekly basis to protect households and businesses from the energy crisis stemming from Russia's war in Ukraine.

How European countries are spending billions on easing energy crisis
Photo by Arthur Lambillotte on Unsplash

Hundreds of billions of euros and counting have been shelled out since Russia invaded its pro-EU neighbour in late February.

Governments have gone all out: from capping gas and electricity prices to rescuing struggling energy companies and providing direct aid to households to fill up their cars.

The public spending has continued, even though European Union countries had accumulated mountains of new debt to save their economies during the Covid pandemic in 2020.

But some leaders have taken pride at their use of the public purse to battle this new crisis, which has sent inflation soaring, raised the cost of living and sparked fears of recession.

After announcing €14billion in new measures last week, Italian Prime Minister Mario Draghi boasted the latest spending put Italy, “among the countries that have spent the most in Europe”.

The Bruegel institute, a Brussels-based think tank that is tracking energy crisis spending by EU governments, ranks Italy as the second-biggest spender in Europe, after Germany.

READ ALSO How EU countries aim to cut energy bills and avoid blackouts this winter

Rome has allocated €59.2billion since September 2021 to shield households and businesses from the rising energy prices, accounting for 3.3 percent of its gross domestic product.

Germany tops the list with €100.2billion, or 2.8 percent of its GDP, as the country was hit hard by its reliance on Russian gas supplies, which have dwindled in suspected retaliation over Western sanctions against Moscow for the war.

On Wednesday, Germany announced the nationalisation of troubled gas giant Uniper.

France, which shielded consumers from gas and electricity price rises early, ranks third with €53.6billion euros allocated so far, representing 2.2 percent of its GDP.

Spending to continue rising
EU countries have now put up €314billion so far since September 2021, according to Bruegel.

“This number is set to increase as energy prices remain elevated,” Simone Tagliapietra, a senior fellow at Bruegel, told AFP.

The energy bills of a typical European family could reach €500 per month early next year, compared to €160 in 2021, according to US investment bank Goldman Sachs.

The measures to help consumers have ranged from a special tax on excess profits in Italy, to the energy price freeze in France, and subsidies public transport in Germany.

But the spending follows a pandemic response that increased public debt, which in the first quarter accounted for 189 percent of Greece’s GDP, 153 percent in Italy, 127 percent in Portugal, 118 percent in Spain and 114 percent in France.

“Initially designed as a temporary response to what was supposed to be a temporary problem, these measures have ballooned and become structural,” Tagliapietra said.

“This is clearly not sustainable from a public finance perspective. It is important that governments make an effort to focus this action on the most vulnerable households and businesses as much as possible.”

Budget reform
The higher spending comes as borrowing costs are rising. The European Central Bank hiked its rate for the first time in more than a decade in July to combat runaway inflation, which has been fuelled by soaring energy prices.

The yield on 10-year French sovereign bonds reached an eight-year high of 2.5 percent on Tuesday, while Germany now pays 1.8 percent interest after boasting a negative rate at the start of the year.

The rate charged to Italy has quadrupled from one percent earlier this year to four percent now, reviving the spectre of the debt crisis that threatened the eurozone a decade ago.

“It is critical to avoid debt crises that could have large destabilising effects and put the EU itself at risk,” the International Monetary Fund warned in a recent blog calling for reforms to budget rules.

The EU has suspended until 2023 rules that limit the public deficit of countries to three percent of GDP and debt to 60 percent.

The European Commission plans to present next month proposals to reform the 27-nation bloc’s budget rules, which have been shattered by the crises.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

ENERGY

Lights out: How Christmas in Italy will be different this year

As the European energy crisis continues, some cities in Italy have chosen to save on electricity by downsizing regular Christmas displays, thus making this year’s festivities a little less flashy.

Lights out: How Christmas in Italy will be different this year

With less than a month to go until the Christmas holidays, many might be rejoicing at the prospect of finally seeing their cities lit up by dazzling Christmas displays.

But, as the European energy crisis shows no sign of abating and many cities across the boot keep struggling to square their accounts in the face of soaring bills, some residents may be disappointed to know that this year’s festive decorations might differ from the norm.

Milan, Italy’s economic capital, was one of the very first Italian cities to announce it would significantly reduce Christmas displays to save on energy.

READ ALSO: Lights off and home working: Milan’s new energy-saving plan for winter 

After reports emerged in early October that the city would end up spending a whopping €130 million on energy bills alone in 2022, Milan’s mayor, Giuseppe Sala, was quick to warn residents that Christmas decorations would be “restrained” and operate “for shorter periods of time”.

And, it wasn’t long before Sala made good on his promises. 

Earlier this month, the city’s authorities agreed on putting up decorations and light displays on December 7th (that is over two weeks after the usual date) and taking them down on January 6th instead of late January. 

Christmas lights in the streets of central Milan

Christmas lights in Milan will be switched on on December 7th, that is over two weeks after the usual switch-on date. Photo by Miguel MEDINA / AFP

Also, while in previous years Milan’s city centre was illuminated overnight, this year’s Christmas lights will be switched on at 4pm and switched off at midnight. 

But, while Milan residents might be slightly dissatisfied with the new arrangements, they sure have little to complain about when compared to Rome residents. 

It’ll be a dark Christmas (literally and, perhaps, even figuratively) for most areas of the Eternal City and not merely because of the current energy crisis. 

READ ALSO: Energy crisis: The Italians reviving ‘nonna’s’ traditions to keep costs down

The city’s tender for this year’s Christmas lights contract received no bids before its deadline on October 27th, which means that, in many neighbourhoods, festive decorations will be largely left to the goodwill and financial means of the residents.

So while the popular Piazza di Spagna, Porta Pia and Via Alessandria will light up over the holiday season thanks to private funding, the San Giovanni and Tuscolano neighbourhoods and Via Cola di Rienzo are currently expected to remain au naturel.

Christmas light in a street in Rome

Many areas of the capital, Rome, will be without lights this year due to lack of funding. Photo by Tiziana FABI / AFP

Things will generally be better in Venice and Florence, where local authorities have recently chosen to maintain their usual arrangements, the only exception being the replacement of regular lights with energy-efficient, LED ones. 

So, while the lighting might be a little softer and displays might not be as remarkable as in previous years, both cities should be able to deal with late-December energy bills more comfortably than they would have had to do otherwise.

READ ALSO: EXPLAINED: How Italy has avoided a huge hike in gas prices – for now 

Having said that, not all Italian cities have decided to resize their Christmas offerings on the back of eye-watering electricity prices. 

Naples, which has long been known for the extravagance of its Christmas and New Year celebrations, has seemingly chosen to turn a blind eye to the energy crisis and will allocate as much as €1.5 million (that’s €150,000 to each one of the ten local municipalities) to this year’s displays.

Unsurprisingly, the comune’s decision has been drawing widespread criticism, with many local political figures pointing out that part, if not most, of the above-mentioned amount should have been spent elsewhere, perhaps in the form of a one-off ‘Christmas bonus’ for struggling households and businesses.

The available money should have been used to “turn off the crisis and light up people’s hearts”, city councillors Antonio Culiers and Francesco Flores said in a joint statement earlier this month.

SHOW COMMENTS