Europe's energy crisis expenditure nears a staggering 800 billion euros
Europe's wallets are feeling the pinch as the costs to safeguard homes and businesses from escalating energy prices hit a staggering 792 billion euros, according to a think-tank's latest analysis. The report urges countries to adopt a strategic, targeted approach in their investments to tackle the power crisis effectively.
As of now, the EU nations have set aside or have designated 681 billion euros for energy spending. Adding to the kitty are 103 billion euros from Britain and 8.1 billion euros from Norway, since September 2021, as per the Bruegel analysis.
Germany leads the spending chart, allocating a hefty 270 billion euros, followed closely by Britain, Italy, and France, who spent less than 150 billion euros each, while most other EU states invested a fraction of that. In terms of per capita spending, Luxembourg, Denmark, and Germany rank high.
Remarkably, the investments dedicated by countries to resolve the energy crisis are in the same ballpark as the EU's 750-billion-euro COVID-19 recovery fund. Introduced in 2020, this fund saw Brussels undertake joint debt and distribute it among the bloc's 27 member states to address the pandemic.
With countries still grappling with the fallout from Russia reducing most of its gas shipments to Europe in 2022, the energy investment upgrade arrives as nations argue for loosening EU guidelines to provide more support for green innovation projects. The debate has stirred concerns among some EU funding recipients that encouraging more state aid might disturb the bloc's internal market. Germany has faced criticism for its massive power support package, which far surpasses what other EU countries can afford.
Bruegel found that most of the support provided by governments has been through non-targeted measures to lower the retail price consumers pay for energy, such as VAT cuts on fuel or retail power rate caps. However, the think-tank stresses that this approach is short-sighted and that governments should instead promote more targeted income-support policies for the lowest income brackets and certain sectors of the economy.
In their recommendations, Bruegel urges countries to invest strategically and on a large scale in energy infrastructure, green and digital transitions, and innovation to create a resilient energy system. They also suggest cost-benefit analyses to guide investment choices, focusing on areas with the highest impact and clear European public goods. Lastly, the think-tank proposes financial market reforms to better unlock financing for these investments. These ideas differ significantly from the current price-suppressing measures that provide short-term relief without addressing the underlying structural issues of the European energy crisis.
- The combined energy investments made by EU countries, British, and Norwegian governments since September 2021 have reached a total of 803.1 billion euros, a sum comparable to the EU's 750-billion-euro COVID-19 recovery fund.
- As nations argue for loosening EU guidelines to support green innovation projects, concerns have arisen among some recipients of EU funding that encouraging more state aid might disrupt the bloc's internal market.
- To tackle the power crisis effectively and create a resilient energy system, Bruegel recommends that countries invest strategically and on a large scale in energy infrastructure, green and digital transitions, and innovation, while conducting cost-benefit analyses to guide investment choices. Moreover, financial market reforms are suggested to better unlock financing for these investments.
