Nearly $1.2 trillion spent in Europe on the energy issue
According to analysts, the cost of protecting European homes and businesses from rising energy expenses has risen to about €800 billion ($1.2 trillion). They advised nations to focus their spending more narrowly in order to address the energy challenge.
Since September 2021, countries in the European Union have set aside or allocated €681 billion for spending related to the energy crisis, while Britain has set aside €103 billion and Norway €8.1 billion.
The overall amount of €792 billion compares to €706 billion in Bruegel’s previous assessment in November, as countries continue to deal with the effects of Russia cutting off the majority of its gas exports to Europe last year throughout the winter.
With a budget of about €270 billion, Germany outspent every other nation on the spending front. The next top spenders were Great Britain, Italy, and France, each of whom spent less than €150 billion. Most EU nations only spent a small portion of that.
Luxembourg, Denmark, and Germany spent the most money per person.
The amount of money set aside by the nations to deal with the energy crisis is currently comparable to the EU’s €750 billion COVID-19 recovery fund. That agreement, made in 2020, authorised Brussels to assume joint debt and transfer it to the 27 member states of the bloc to deal with the pandemic.
The report on energy spending comes as nations discuss EU proposals to relax state assistance regulations even more for green technology initiatives as Europe strives to compete with American and Chinese subsidies.
In several EU capitals, those ideas have sparked worries that promoting greater state aid could disturb the bloc’s internal market. Germany has come under fire for its massive energy assistance programme, which is much beyond what other EU countries can afford.
According to Bruegel, governments have primarily supported non-targeted actions to reduce the retail price consumers pay for energy, such as reducing the VAT on petrol or setting retail power price caps.
According to the think tank, this relationship needed to alter since states were running out of room in their budgets to continue providing such extensive assistance.
“Governments should now encourage more income-support programmes focused towards the lowest two quintiles of the income distribution and towards vital sectors of the economy,” research analyst Giovanni Sgaravatti said. “Price-suppressing measures that are de facto fossil fuels subsidies.”
The report is released as the conflict in Ukraine approaches its one-year mark with no sign of a resolution. Both its ground operations in eastern Ukraine and its ferocious missile barrages appear to be intensifying.
This week will see a flurry of meetings with senior officials to discuss how the West might aid Ukraine. On Tuesday (Wednesday AED), representatives from the US and Ukraine will meet. NATO defence ministerial discussions will follow. Friday marks the commencement of the Munich Security Conference, which is expected to include a meeting of the Group of Seven foreign ministers.
President Volodymyr Zelensky is looking for new weapons to thwart Russian President Vladimir Putin’s invasion, and on Friday, Russia began its heaviest barrage of missile attacks so far this year. The second-lowest credit rating was given to Ukraine by Moody’s Investors Service on Friday due to “long-lasting issues” the country’s economy and public finances have faced as a result of the conflict with Russia.