Europe spends roughly EUR 280 bn to ease energy crisis

Since September 2021 European governments have earmarked around EUR 280 bn to ease the pain of surging energy prices in the region, according to think tank Bruegel. This amount includes all funds spent by European countries in order to ease the burden of high energy bills for regional businesses and households, including energy subsidies for small Greek businesses and direct payouts in Belgium. Meanwhile, some of the allocated funds have
not yet been spent. “Prices will stay high throughout the winter and governments should work with the worst-case scenario assumption that they will not go away even after that,” said Giovanni Sgaravatti, an analyst at Bruegel. “Governments should focus on reducing energy demand where possible.”

Wholesale energy prices have soared to more than 10x their seasonal average over the past five years as Russia squeezes natural gas flows to Europe. This factor is hitting economic output across the continent, with heavy industry under pressure. At the same time, consumers faced a sharp rise in consumer good and service prices. Among European countries, Germany allocated EUR 60.2 bn, or 1.7% of GDP and the highest amount, for public support during the energy crisis. Italy earmarked EUR 49.5 bn (2.8% of GDP), EUR 44.7 bn (1.8%) in France, EUR 44.3 bn (1.6%) in the UK and EUR 27.3 bn (2.3%) in Spain. “Europe’s policymakers have responded to the energy cost surge mostly with broad-based, price-suppressing measures, including subsidies, tax cuts and price controls,” IMF experts wrote this month, saying the measures delay the needed adjustment to conserve energy. “It keeps global energy demand and prices higher than they would otherwise be,” their report said.