EU says measures to ease energy costs must have an end date
With energy costs climbing again, Europe is being urged not to repeat the expensive policy mistakes made during the 2022 crisis. European Economic Commissioner Valdis Dombrovskis said governments should make sure any support for households and businesses is...
With energy costs climbing again, Europe is being urged not to repeat the expensive policy mistakes made during the 2022 crisis. European Economic Commissioner Valdis Dombrovskis said governments should make sure any support for households and businesses is tightly targeted and comes with a clear end-date.
Speaking at the International Monetary Fund, Mr Dombrovskis said efforts to blunt the impact of rising prices linked to the closure of the Strait of Hormuz, following the US-Israeli war on Iran, must not end up encouraging greater use of fossil fuels.
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“One key lesson from the last energy crisis is that measures were often insufficiently targeted and remained in place for too long, making them much more fiscally costly than necessary. This is something we want to avoid now,” Mr Dombrovskis said in a conversation with IMF European Department head Alfred Kammer.
He said the backdrop had become more difficult than during the 2022 shock triggered by Russia’s war on Ukraine, with higher debt, wider deficits and elevated interest rates leaving EU governments under greater pressure to avoid prolonged and expensive interventions to offset energy price surges.
Valdis Dombrovskis said focused support takes more work
“They should also avoid increasing demand for oil and gas at a time when demand should be declining,” he said.
“The problem is that broad measures, such as across-the-board tax cuts, are easier to implement politically and administratively.
“Targeted measures require defining eligibility thresholds, which takes more effort,” Mr Dombrovskis said.
“Given today’s tighter fiscal space and financial conditions, we need to be much more focused and targeted in our response,” he added.
Several EU governments already appear to be moving in that direction.
Germany on Monday approved two months of fuel price relief for consumers and businesses worth €1.6 billion, while France said any assistance would be limited to the sectors under the greatest strain and reviewed for renewal each month.