Europe has less cash for energy support

European governments are facing a renewed rise in energy prices. But unlike during the crisis in 2022, they have significantly less financial leeway to respond.

The escalation of the conflict between the US, Israel and Iran has pushed oil prices sharply higher and is increasing pressure on politicians to help households and businesses. However, the situation is more complicated than it was a few years ago.

The Covid-19 pandemic and the ensuing energy crisis significantly increased budget deficits. Economic growth in Europe is weaker, and governments are also facing higher debt-servicing costs. Several countries are therefore opting for cheaper measures for the time being.

France, Greece and Poland have introduced price caps, discounts or margin restrictions, while Germany is considering regulating fuel prices.

However, analysts warn that if gas supplies from Qatar were to be interrupted, or if high prices were to persist for longer, governments could return to subsidies, at least in part.

Economists expect that any aid this time will be far more targeted than during the previous crisis. According to Morgan Stanley estimates, eurozone countries would only be able to provide support at a fraction of the spending seen in 2022 to 2023 while complying with EU fiscal rules.

(reuters, pir)